Navigating the Republican Milieu Part II

March 22, 2012

Gotta love Newt. Now that Newt’s a Catholic convert we’re supposed to vote for him and forgive his personal indiscretions. Why? Because no one is perfect and private failings should not be put up to judgment as if the rest of us are better. Can we be despicable people and change? Newt’s scandalous private life is none of my business. Yes, he is a public person and he should hold himself to a higher standard, but that doesn’t make me any better than him. The wider issue about Gingrich’s infidelities is what they reveal about his character manifest in his governance. Newt is a man who is ruled by his appetites, and if something appeals to him he will deviate from what he might intellectually understand to be right in order to appeal to some other desire. Appetites are not limited to actions taken with respect to carnal relations or food and drink, but to anger, to lust for power, and many other things.

While Gingrich led the charge for the impeachment of Bill Clinton he was having an extra-marital affair. Gingrich’s hunt was hypocritical, but his defenders properly point out the difference: Bill Clinton’s impeachment was over his perjury, whereas Gingrich did not commit any felony. However, he did, according to an Ethics Committee, lie about conflicts of interest and money laundering charges, which he had attacked others for in the past.

This string of contradictions and misrepresentations is not unique in Gingrich’s congressional history. Following a recent debate, Gingrich claimed to having balanced the budget for four years as if this were his accomplishment. All a balanced budget means is that he could spend more and claim to be fiscally conservative at the same time. The budget can be balanced while increasing spending and entitlements, borrowing the money to pay everything and the kitchen sink. This does nothing to fix the economy or improve responsibility in government. When we look at how much Gingrich helped Clinton grow the government in his tenure as House Speaker, describing him as “fiscally responsible” doesn’t quite fit.

Can we take Gingrich seriously on his newfound opposition to Obamacare? In 1993, on Meet the Press, Gingrich expressed his support for HillaryCare, which is largely what Obamacare became. In 2009, when Gingrich was not running for president, he expressed his support for ObamaCare. In an op-ed praising Obama’s initiative, Newt wrote,

“More than 20 percent of all Medicare spending occurs in the last two months of life. Gundersen Lutheran Health System in La Crosse, Wisconsin has developed a successful end-of-life, best practice that combines: 1) community-wide advance care planning, where 90 percent of patients have advance directives; 2) hospice and palliative care; and 3) coordination of services through an electronic medical record. The Gundersen approach empowers patients and families to control and direct their care. The Dartmouth Health Atlas has documented that Gundersen delivers care at a 30 percent lower rate than the national average ($18,359 versus $25,860). If Gundersen’s approach was used to care for the approximately 4.5 million Medicare beneficiaries who die every year, Medicare could save more than $33 billion a year.”1

When Gingrich decided to run for president, however, he seized on Sarah Palin’s description of “End of Life Care” as “death panels,” and was suddenly against it.

“You’re asking us to trust turning power over to the government, when there clearly are people in America who believe in establishing euthanasia.”2

Gingrich, like a good career politician, harnesses conservative reaction in a complete about-face. Will the real Mr. Gingrich stand up?

Ron Paul

I don’t always agree with him, and he is not a distributist candidate by far, yet Ron Paul has been fairly consistent. Ron Paul is the only candidate who understands the problems with America’s foreign policy, urging we get out of our immoral—and certainly unjust, foreign wars. Out of all the Republican candidates, Paul seems to understand our problems with Iran stem from the historic American manipulation of the Iranian government. He is against torture, something that Catholics, following not only the tradition but the current magisterium, should be quite pleased with.

What about the National Debt and our monetary system? Does Ron Paul get it or does he? Paul correctly understands the problem with our monetary system is the private nature of the Federal Reserve, an unaccountable and unelected institution that has a stranglehold over our monetary system and policy. Paul has consistently championed an audit of the Federal Reserve and, if elected, would eliminate it. However, Paul would return to the gold standard, claiming that it is of fixed value. This is unfortunately not true. Is he ignoring that in the late 19th century gold was a way for the banking industry to control the economy, just as it does now through the Federal Reserve, and that it lobbied heavily to outlaw alternatives to gold’s hegemony? Paul wants to revert to a gold standard philosophy that the market will determine the value of currency—not by any kind of edict but by the hidden hand. Gold will just find its own value. But the misconception is this: the market will not determine the value of money, the men in the market will. Without regulation, control the gold and you control the money supply. Paul’s solution would bring us full circle.

Is Ron Paul a candidate we can vote for and sleep well at night? Paul is a “what you see is what you get” politician. The problem is “what you get” is also part and parcel of the problem with voting for Ron Paul. For example, his overall philosophy of government, based squarely within the Austro-Libertarian viewpoint, holds that the only role of government is to oppose fraud or force and enforce contracts. The government has no other role. When viewed within the context of HHS, Obamacare, the TSA, domestic wiretapping and other government overreach, it sounds very good. Yet, does it bring justice? The mission of Distributism is not merely justice in exchange and the economy, but also in government, which is an integral player in both. As Richard Aleman pointed out in his excellent piece during the Obamacare debate: yes, we are opposed to this plan, but not “a” plan. There is no reason, if based on justice, that government cannot fund a solution to help people cope with health costs. Isn’t that in the interest of the common good?

Let us look at the recent debate in Arizona. Paul, who says his experience as an OB doctor has taught him that life begins at conception, has also dispensed “Plan B,” a birth control equivalent. This should give us pause. Paul is consistent, in as much as he does not claim to be against contraception and then votes to give money to Planned Parenthood. But he is consistent in the wrong direction. Let us consider this from Dr. Bill Mueller, in a recent talk at the cathedral from San Antonio:

What you may not already know is that contraception poses real medical dangers, and this is why we all should be concerned. These dangers have been concealed by lies about the safety and necessity of contraception. These lies have misled Americans to believe that pregnancy is a disease…. As a physician of good conscience, I am here to tell you that contraceptives increase a woman’s risk for cancer, strokes, heart attacks, and even death. As a physician of good conscience, I am here to tell you that contraceptives can cause abortions before a woman even knows she is pregnant. As a physician of good conscience, I am here to tell you that women who think contraception will keep them safe in a relationship often end up used, abused and discarded by men who should be upholding the dignity of our sisters in Christ.3

Irrespective of whether or not one agrees with Catholic principles on contraception, one should be able to look at this from a medical perspective. Paul’s position is simply that government shouldn’t fund contraception and products causing health problems should simply be regulated by individuals and the market. In the recent Arizona GOP debate, Paul pointed to the neutrality of the birth control pill, which, according to him, is not the cause of immorality, rather it’s the immorality that causes the pill. Now there is a certain truth to this. Immorality of the people causes them to make immoral choices, whereas moral people tend to choose not to engage in immoral practices. Yet, this suggests that the common culture, common law, and positive law have no role in shaping common morality. Immorality will increase with the absence of law. This is why in the Old West the first thing a town did was to elect a sheriff. Law is not merely a deterrent, it as an indicator of public morality. If pornography is illegal, it steers public morality in as much as people who know it is illegal are less likely to try to acquire it. You won’t stop everyone from acquiring it, but you would deter many who might not otherwise. In fact, one could say the point of law is not to prosecute each and every instance of its violation, but to enforce public morality and the common good. This is anathema to Paul’s libertarian principles.

Ron Paul also wants to legalize drugs. Because drugs are illegal they have a high sale price on the black market, and institutions like banks, parts of government and individuals make a lot of money drug trafficking. The CIA has a long and documented history of fostering the drug trade in Asia and the Golden Crescent, not as an organization, but as individuals operating under cover of law to get funding for their operations. This was documented heavily by journalist Gary Webb and it is what Paul draws on to make his case to legalize drugs.

Paul’s idea is simple but simplicity does not necessarily make good policy. Make drugs legal so that the prices will come down and reduce the interest in drug dealing. Or, get government out and the market will take care of the problem. Drugs have many negative consequences that destroy lives. If government is based on justice then the government has a significant interest in curtailing their use and proliferation.

We return to Natural law—anathema to the libertarian dialectic. One is not free to turn liberty into license. True liberty is the means to do what is good, as Leo XIII argues in his encyclical, Libertas. A society where people can dope up their minds and lose their cognitive function is a defeat for society, which is not only contrary to western tradition, it is contrary to the role of government. The market will not take care of it. The war on drugs is failing, but the solution is not thereby to legalize them. The government could just as easily start prosecuting drug dealers instead of offering them plea deals. There are many options that do not entail legalizing drugs unless you believe the government shouldn’t be involved. But the fact that the war on drugs has been a colossal failure does not negate that the government can and should control their proliferation.

Likewise, if we look at the wars in Iraq and Afghanistan, both of which I oppose, Paul does not dispute these wars based on Catholic social principles on just warfare. He opposes them solely based on the idea that government has no business conducting war. In good ol’ libertarian style, Paul proposes letters of Marque for alleged terrorists. This is a strange solution, first, because letters of Marque run contrary to the accepted norms of international law (letters of Marque were forbidden by the 1856 Paris declaration), and second, because they create sheer lawlessness (for those unaware, letters of Marque were essentially a way for governments to legalize piracy against their enemies. The manifold possibilities for fraud and the devastating impact of weapons commercially available to those with the money would only increase the murder of innocent civilians all over the world. It would be tantamount to turning the world into the Old West, with modern-day bounty hunters running around under color of law but in reality with license to commit every rash barbarism possible.

Looking over various debates, I can’t help but come to the conclusion that the candidates being offered to us do not offer any real solutions. Romney, Gingrich and Santorum have spent much effort attacking each other, but they do not differ very much amongst themselves. They are all riddled with contradictions, saying one thing when they run for office, doing something else when they are in office. Is Ron Paul a better choice? Perhaps, otherwise the media would not go to great lengths to ignore him. Yet, is Ron Paul where we want to go? I would argue no, he is not a solution within the Catholic social tradition. Man needs good government, not a mere referee.

Ryan Grant
Ryan Grant is a native of eastern Connecticut. He received his Bachelor's degree in Philosophy and Theology at Franciscan University of Steubenville, and also studied at Holy Apostles Seminary. He currently runs Mediatrix Press, as well as the Bellarmine Translation Project, and resides in Post Falls ID with his wife and five children.

124 Comments

Ok, clearly this whole conversation has devolved into misunderstanding, because I did not “assert” that you were Paul, nor do I believe such. I merely allowed for the possibility in light of the fact that you believed my comments regarding fiat money were directed at you. I apologize for misunderstanding your meaning there.

The “If I have something to say I’m going to say it” attitude is hardly a good starting point for a rational debate, let alone a reflection of Christian charity.

You misunderstood what I said. That was a response to your assertion (likewise hardly a reflection of Christian charity) that I’m really masquerading as Paul. This reflects the limitations of written communication, as when I said “I think you are not getting x”, I’m framing it with respect to say I think you missed something, not you knave! or something like that.

Mr. Grant,“A reasonable person who sees comments balloon from 50 to 70 to 100 is barely going to know where to start. I can’t tell you how many times I have gone up and down trying to figure out where I just was.”
A reasonable person also refrains from accusing others of having sorely mistaken views without evidence. If you don’t have time to read everything, at least allow for the possibility that just because you haven’t read it doesn’t mean I haven’t said it. The “If I have something to say I’m going to say it” attitude is hardly a good starting point for a rational debate, let alone a reflection of Christian charity. As for what definition of fiat money you’ve used, I haven’t read everything you’ve said, but I have read all your replies to me, and I don’t think any of them contained a definition of fiat money. Once again, you go much too far in saying that I haven’t read “anything” you’ve said. Even if I had read it, I could have forgotten it. So your claim that I’ve read nothing you’ve said is completely unwarranted.
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As for your substantive comments regarding Ron Paul, I’ll have to get to them tomorrow.

And it’s not even a long comment. And unless Paul is an alternate username that you use, it wasn’t you that I was addressing in the first place, which might explain why you thought I was saying something I wasn’t.
Good grief man, let’s not start that. I don’t have the time for that kind of nonsense. If I have something to say I’m going to say it. A reasonable person who sees comments balloon from 50 to 70 to 100 is barely going to know where to start. I can’t tell you how many times I have gone up and down trying to figure out where I just was.

I don’t even know what definition of fiat money you’ve used.

Then you didn’t read anything I said. No matter. We’re best off leaving that box closed.

This has already been said, but I want to add a few points–Ron Paul does not want to “legalize drugs.” He wants to end federal criminal laws on drugs, for several reasons. First, it’s a state issue, so the federal government doesn’t have a legal say in the first place; the current laws are all usurpations of state powers.

Alright, Ron Paul is in favor of other people legalizing drugs. It seems like a distinction without a difference.
Secondly, more importantly, the Constitution and the historical precedents interpreting ICC by the courts give the Federal government the right to police activity happening across state lines, which most drug activity does. Now, I don’t agree with the historic stare decisis with respect to ICC, but nevertheless, it constitutes a legal basis as the courts have always interpreted it for the Federal government to make said laws.
Moreover, I do want believe that in a just society a national government should be able to declare what can be scientifically proven to be a dangerous narcotic illegal, or else highly regulate its use.

Second, the drug war causes much more harm than it solves in many ways. Is it really so bad to smoke marijuana that you should be thrown in the federal clink for several years, only to come out a more hardened criminal?

No debate here. The “war on drugs”, like the war on “terrorism” is a colossal fraud. That doesn’t mean the government can’t fight the war. Instead of protecting the white shoe boys club, or the dealers and throwing a bunch of kids in jail, they might try assisting users in finding rehab while putting the dealers (who don’t normally use what they sell) in jail.

As Ron Paul has stated many times, addiction is a medical problem, not a legal one. The analogy to alcohol is one I’ve never seen an answer to, and it’s perfect. If you want to control drugs, why not alcohol?

Well, let’s try this one. Alcohol has a proportionate use that narcotics do not. Of course, if we had something based on science and not making money, many prescription drugs would also be illegal. The use of say, pot, even once, has deleterious effects on psychology, DNA and other things, which can be helped with treatment, but have disastrous consequences that drinking alcohol once, let alone in moderation, do not have.

a very strong argument can be made under Catholic principles that this is the sort of thing that government simply shouldn’t try to micromanage. How are you going to catch all the people who grow weed in their back yard and smoke it in their own home? The costs (both to the public treasury and our privacy) would be far out of proportion to the benefit.

Just because the government should hold drugs to be illegal due to their effects, does not mean that we need massive federal involvement in the smallest of drug offenses. In fact, applying a traditional catholic understanding of justice one would not prosecute all individual uses of drugs, but rather the large and public uses of it. Drug dealers and drug smugglers for example could be prosecuted, while individuals using it could either be ignored or else given rehab. What we don’t need, is where right now police in some states like Michigan or Indiana want to go in people’s backyards without warrants because they might be growing pot. I think we can both agree that this is asinine.

I’m assuming Mr. Grant missed a few debates, because Ron Paul specifically and explicitly raised the issue of Just War theory at least twice in reference to this precise issue. Furthermore, he has never said that it isn’t government’s job to go to war; what he has said is that it should not be aggressive or preemptive. Indeed, he explicitly stated in at least one debate that if Congress declared war, he would fight it to win it.

This is exactly what I’m talking about. The Constitution, well, let me say this first. I don’t believe in the Constitution. I actually agree with libertarians like Stefan Kincella who argue the Constitution is a highly flawed document and that the Articles of Confederation worked far better. I think the fact that under Bush-Obama the Constitution no longer practically functions evinces that there are serious flaws with it, particularly with the checks on the judicial branch and the executive branch. What does the constitution say about executive orders? About the principles to be used by the judiciary in determining the constitution’s meaning? Debates with that appeared even at the beginning. The framers wanted to establish a system of positive law distinct from the universal constitution of England which would not allow for re-interpretations contrary to the intent, but then did not define the intent in the document. I think that’s a big problem. Moreover I think the political principles are erroneous with respect to traditional Catholic teaching. That being said, if the police come to the door with no warrant you can bet I’ll drape myself in the 4th amendment, because as long as its the law of the land I’m going to use it, even if the government is hell-bent on ignoring it.
Now, Ron Paul does try to use a just war concept, but, he was there voting to give the Bush regime the authorization to invade Afghanistan. Where is that in the Constitution? What those who can read Arabic, like myself, who have studies Islam for years and that region in particular know, and what our State department and intelligence services certainly know, is that the Taliban had little to do with 9/11 other than harboring Bin Laden, and he was in Pakistan on September 10th 2011 getting dialysis treatment at a military hospital. Moreover there was no such thing as “Al-Qaeda” (pronounced Ahl Kyeeda) until 6 months earlier, when Jamal Al-Fadl, someone who owed Bin Laden hundreds of thousands of dollars was given a story by the FBI that would define Al Qaeda in a way to fit American mafia laws, instead of the reality that Bin Laden was just a mover and shaker, and Al Qaeda, apart from being a slang word to use the bathroom in Arabic, means base, basis, database, or plan, and was never used to identify Bin Laden or his operations until Al Fadl made a plea deal with the FBI which would allow them to charge Bin Laden in absentia for the 1998 bombing of the Kobar towers. Now I’m not going to start going down the 9/11 truth rabbit hole, because there are so many clues and questions we’ll never know what really happened, but the Usama bin Laden narrative is nonsense, and a mere pretense to get American companies pumping natural gas and processing lithium in the golden crescent. Now Paul, went along with the crowd, no doubt traumatized by the loss of life, and authorized bombing actions and military interventions that have killed thousands of innocent civilians in a country where 70% of the people do not even know what 9/11 was. He went against the Constitution, because he believed the phony narrative given by the Bush regime, like most Americans. If he believes that some country attacked ours, but it was based on some kind of false flag operation, or the intelligence got the agents wrong, he would support a war on false principles. If congress declared an unjust war, he would support it based on the fact the Constitution is being used correctly. The Constitution is not the final basis of morality.The federal government simply has no authority on health care, or a host of other topics, but the states can do what they please. Of course, underlying Mr. Grant’s point is the assumption that a government funded solution to the health care crisis is a good idea

Just to be clear, we do support the idea that the government can do something to assist in health care. Ultimately government funded plans will not stop the health care crisis, since the crisis can’t be solved by funding. What we generally agree on at the review is there is no reason the government couldn’t fund or subsidize a health plan. I don’t agree with the over-reaching government bandaid to essentially bail out the health insurance industry. Moreover, our thought does not mean it must be the federal government, it could just as easily be the state governments.

Mr. Grant,
I say due diligence because the quote you pulled was literally a handful of lines down from the very thing that proved you wrong. 117 comments has nothing to do with it; unless you skipped most of my comment and just happened to land on the last bit, you would have had to have read that part first. And it’s not even a long comment. And unless Paul is an alternate username that you use, it wasn’t you that I was addressing in the first place, which might explain why you thought I was saying something I wasn’t. I don’t even know what definition of fiat money you’ve used.

Clearly you have either cherry-picked a single quotation, or failed to do your due diligence and simply neglected to read what I said earlier in the same comment which you quoted.

How can you say due-diligence when we are at over 117 comments and I have only one hour a day to use the internet which requires me prioritize how much time I spend on things. I did not intend to mis-represent you, I saw a quote and reacted to it, namely yours (and Ben’s) claim that I was using an incorrect definition of fiat money, which I have just demonstrated I was not, irrespective of any wiki-quotes. Then forgetting where I was and who was arguing what I got the idea you were arguing gold was inherently valuable (which I’m glad you’re not).

But we should in fact drop this line of argument, since it is abundantly clear we’re not going to make any more progress on currency questions.

Incidentally, going back to my original comment about Ron Paul, I might have been mistaken about saying that the Catholic Church is OK with Plan B being used for non-contraceptive purposes.

This is correct, but it comes from different principles. Using something like that for non-contraceptive purposes would be rather a venial sin, because there is no proportionate use to its application, and ultimately it will cause more problems for a woman’s body than it would solve. Women who have hormonal problems often get prescribed the pill because it contains synthetic hormones that supposedly correct the imbalance. It also messes up a woman’s natural cycle and because if a woman did have relations it could cause an abortion. So there is no proportionate use. The only thing I’m aware of in moral theology that qualifies as a kind of exception is a douche administered to a rape victim, since there is no dander of expelling a fertilized ovum.

Incidentally, going back to my original comment about Ron Paul, I might have been mistaken about saying that the Catholic Church is OK with Plan B being used for non-contraceptive purposes. Contraceptives generally I know they do, but Plan B specifically I’m not sure. A friend of mine thinks there aren’t any legitimate uses for it.

Mr. Grant,
I would drop this if it weren’t for your gross misrepresentation of what.
–“So when does wikipedia become a source of truth? Nevertheless, that’s not necessarily true. In the middle ages there was a fiat currency in England called the “Tally Stick”, which was not mandated by law. You could use gold. But you had to pay your taxes in it, so it was good for something. This was a fiat currency. Again, the Roman republic took pieces of bronze and soaked them in vinegar to make them worthless, and issued them as currency. Because you had to pay your taxes in them, it was useful to exchange in it, the same way that it is useful to exchange in wheat or salt, because eventually you will need it for food. So it does in fact derive a value, I have to pay my taxes in this, so I might as well use it to exchange these rather than shoes for a window.”
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My original point was that currency does not gain value just because people use it to pay their taxes, not that the imposition of a tax on an otherwise worthless class of items would not therefore bestow some value on them. There is a difference here, subtle though it be. Remember that our working definition of fiat money is money that has value because of government regulation or law. Salt, a form of currency in ancient times, was valuable (and still is) inherently, and thus does not derive value from regulation or law, regardless of whether taxes are paid in salt. So what I said was true. A given currency can derive its value from something other than regulation or law regardless of whether it is the means of paying taxes. Now onto the more serious error.
–“This is what I think you and Ben do not seem to grasp, that money does not have inherent value, but relative value, and it is the relative factors that put demands on money as a medium of exchange, not its inherent value. Gold has no inherent value, but because of its historical precedent and scarcity you think it will work better. I don’t, and perhaps its the best place to leave it.”
Clearly you have either cherry-picked a single quotation, or failed to do your due diligence and simply neglected to read what I said earlier in the same comment which you quoted. To wit, I said: “First, in answer to your question, money is, at its most basic, a medium of exchange, and therefore it need not be real wealth in and of itself. It often is, however, and cases like gold, salt, and others are good examples. Money that comes about naturally tends to be something that is valued of itself for the precise reason that no one wants to trade valueless items for valuable items. Of course, as you mention, there are exceptions to that rule as well. But the fundamental point is that the advantage of a gold system over a paper system is that gold cannot be inflated arbitrarily in the way paper (or sticks, or whatever) can.”
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A fair reading of this clearly shows that I don’t believe money has inherent value just because it is money. Moreover, I never said gold made a better currency because it is scarce, unless you’re using that word to refer to the fact that it can’t be arbitrarily inflated or deflated.

According to Wikipedia, “Fiat money is money that derives its value from government regulation or law.” Money does not derive its value from government regulation or law simply because it is how people pay taxes, so Ben Yonan is right that you’re playing fast and loose with terminology.

So when does wikipedia become a source of truth? Nevertheless, that’s not necessarily true. In the middle ages there was a fiat currency in England called the “Tally Stick”, which was not mandated by law. You could use gold. But you had to pay your taxes in it, so it was good for something. This was a fiat currency. Again, the Roman republic took pieces of bronze and soaked them in vinegar to make them worthless, and issued them as currency. Because you had to pay your taxes in them, it was useful to exchange in it, the same way that it is useful to exchange in wheat or salt, because eventually you will need it for food. So it does in fact derive a value, I have to pay my taxes in this, so I might as well use it to exchange these rather than shoes for a window. And since the glass maker needs to pay his taxes, he will take it and likewise knowing the miller needs it to pay taxes, will use it to pay for flour. Thus the governments taxing will create value, because it creates trust. That is the value of a currency, is that you trust in its effectiveness to purchase goods and services. That’s why you use the FED funny money, because you know it will be taken at the gas station, at the supermarket, at what have you. So it does attain value. This is what I think you and Ben do not seem to grasp, that money does not have inherent value, but relative value, and it is the relative factors that put demands on money as a medium of exchange, not its inherent value. Gold has no inherent value, but because of its historical precedent and scarcity you think it will work better. I don’t, and perhaps its the best place to leave it.

Mr. Grant,
I believe what Ben Yonan meant when he said that it wouldn’t be a worthwhile argument is that all you really did was to say that your preferred monetary system would be better than a gold standard if you assume no FRB, free competition of currencies, and an unwillingness of the populace to allow the government to abuse the currency. But of course, if you make the same assumptions in favor of the gold standard, you have no argument, so it’s not your monetary system that’s better, but rather the legal framework and culture that make it better. I.e., you set up a completely unfair competition and thus make yourself the winner. At least, I think that’s what he was getting at. Regardless, I’m ready for something more on the actual topic of Ron Paul myself.
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Nevertheless, I can’t help but address a couple of things Paul said. First, in answer to your question, money is, at its most basic, a medium of exchange, and therefore it need not be real wealth in and of itself. It often is, however, and cases like gold, salt, and others are good examples. Money that comes about naturally tends to be something that is valued of itself for the precise reason that no one wants to trade valueless items for valuable items. Of course, as you mention, there are exceptions to that rule as well. But the fundamental point is that the advantage of a gold system over a paper system is that gold cannot be inflated arbitrarily in the way paper (or sticks, or whatever) can. Nobody ever claimed that gold was perfect (which is what you seem to think we’re arguing), just that it’s better, and constitutional. Likewise, no one has argued that paper money can’t work, merely that it usually doesn’t because it is much easier to abuse. Finally, you are using the term “fiat money” incorrectly. According to Wikipedia, “Fiat money is money that derives its value from government regulation or law.” Money does not derive its value from government regulation or law simply because it is how people pay taxes, so Ben Yonan is right that you’re playing fast and loose with terminology.

BTW, I am done here. All I am seeing are the same old tired arguments for gold, which have been soundly refuted by various people, and the same old objections to government-printed money, also soundly refuted by those same people.

Paul continues with his strawman fallacy. He says in part, “But the fact is Austrian economists of all shades want free market.” What relevance does this comment have to anything I said?

Let’s cool it. There are so many comments I don’t have the time to wade into it, I’d rather return to the original Ron Paul question, which I’ve been too busy to get back to. I’ll try to come to that tomorrow.

But then you speak of a gold standard under no conditions, and say the bank could go bust. That’s not even an worthwhile argument.

I don’t see how it isn’t. That happened in history! If the bank has invested the gold, or lent it out under an FRB system, and there is a run on the bank, we will effectively lose our gold. If its the mere paper which represents the gold, well guess what? We no longer possess the paper which represents the gold.
Now, let’s say we put this in Libertarian terms. FDIC is bad because it is government intervention and encourages banks to make risky loans. So instead people purchase private insurance for their bank notes. No central bank, so if there is a run on the bank the insurance will provide money for people. The problem is, like with private health insurance today, they will keep bailing out the banks and pass the costs on to the consumer. This is because the profit motive in capitalism is based on individualism, in contradistinction to socialism which eviscerates the profit motive and stagnates the economy. The profit motive needs to be subordinated to the common good, so that it is still there, but man is focused on his primary end, acquiring the goods necessary for his family, but in a way that is beneficial to society also. 400 years has showed us enlightened self interest and the common good are mutually exclusive.
Now let us take a gold standard with no central bank, where the money is not based on debt (i.e. no FRB). What you have to understand is that in our current economy, the eroding of the dollar is not merely due to the Fed printing more funny money, it is also by private banks all over the country inflating the currency with bank credit, which represents between 90-95% of all money in use in the US. So if you have a gold standard and you have FRB inevitably banks will grow the money supply with paper promises to repay that do not represent real gold, but mere bank credit. When that bubble bursts, people who thought they had “x” amount of gold (certificates which represent the gold) find out they don’t have it. So the only way for the gold standard to work is if FRB is illegal, and banks can only lend 1:1, 1 unit of gold which represents real deposits and investments.
So if we consider that system, there is a fixed amount in the economy which cannot expand and contract, and with FRB being illegal (which Milton Friedman, the libertarian economist advocated since it qualifies as fraud) banks cannot artificially create currency bubbles. Considering this system, we run into a problem. Suppose there are more demands for money than actual money that exists. The population increases but the same amount of money is in the market with new demands on it. The growing population puts new demands on goods and services which must be bought and paid for. Where does the money come from for them? Libertarian thinking says the market will react by spurring investment to meet the new demands. Yet, that means more money has to be spent somewhere. There is no way to spend more money into the market, unless the wealthy, or the bank, invest it into a business.
So the wealthy decide to invest in a business. Historically this means that they will do this via the stock exchange. This means this does not run on a partnership model, but on a vulture capital model, and most profits will run to the top not to the worker. This was the problem in the 19th century. Now let’s say a bank does it. A bank can perform a positive role in the community, by infusing capital in rather than sucking it out as it does now. But… that depends on the nature of the banks activity. If it loans via usury, the company will not have much money to pay for salaries because it will be paying usurious interest. If it is on a partnership model, the interest charged may not be usurious, but a dividend on profits since the bank’s money functioned as capital. Yet if it is a local bank, its investment funds are limited, since it is the money deposited by local working people, whose wages are modest. Those with investments in large banks also are in a position to limit how that money is used, and focus it into vulture capital ventures. This limits freedom. This is why I say, unless you find a gold mine, you can not grow the money supply relative to demand. This is why I advocate a rigorously controlled national debt free currency, according to the principles above, because I believe it works better than a gold standard, and can allow money to flow better than gold does. That doesn’t mean gold performs no role in such a monetary system. In fact gold could serve to warn local and national governments that there is too much or too little money in circulation relative to the value of gold. All money is, is a medium of exchange. The question of what to use as money is based on how well it works to facilitate exchange. Hithreto I don’t think you’ve understood that this is what I’m talking about, because you go back to talking about the fed. A national debt free fiat currency is a world away from the debt based FED funny money.

Paul continues with his strawman fallacy. He says in part, “But the fact is Austrian economists of all shades want free market.” What relevance does this comment have to anything I said? Absolutely none. I have not defended the Austrian theory(s) of free market. In fact, I have, at least twice, clearly stated my opposition to it. But the facts will not stop Paul from posting his intentional misrepresentations and logical fallacies.

BTW, I am done here. All I am seeing are the same old tired arguments for gold, which have been soundly refuted by various people, and the same old objections to government-printed money, also soundly refuted by those same people. But you will interpret history in your erroneous philosophies of the Austrian school (which I will admit has quite a bit of variations) and claim fiat money has never worked well, despite the history of the tally stick (which had lasted as money for 700 years!).
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Also, I am getting ready for the Sacred Triduum, so I won’t waste any more time here. By all means, do you sophistries and claim your “victories” over those “statists” advocating “fiat money.” I see in this just another aspect of the fight against the Catholic Church and the “Enlightenment,” of which Rothbard and Mises are still continuing.

BTW, Cato has stated that natural law is the foundation of the Austrians. If that is so, then the principles of traditional natural law theory and the libertarians should be the same but they aren’t, as another article, just posted recently here on the Distributist Review, “Subsidiarity and Libertarian “Small Government””, shows.

You can do all your sophistry yourself, Ben Yonan. But the fact is Austrian economists of all shades want free market, no interference with competition by government. And that is condemned by the Catholic Church. As for your thing about colonial script vs. the Continental, all irrelevant to the point that the Continental worked very well until the British warred on it by counterfeiting it in the last years of the war.

Quoting Bill Still:
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It was only during the last half of the Revolutionary war that the continental currency became wildly debauched. Why? It was not as a result of the duly-elected government, the Continental Congress, printing too much of their “worthless” fiat paper, it was because the British parked ships in Boston Harbor with complete printing presses on board where they massively counterfeited the new American currency and spent it into circulation, driving up demand and prices everywhere.

These were the circumstances that led George Washington to lament towards the end of the Revolutionary war:

“…a wagon load of money will scarcely purchase a wagon load of provisions.”
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As for this:

“In addition, Paul refers to all money as “fiat” money. This is to equivocate on the term “fiat”. Hence, there can be no discussion about money as long as Paul insists on this sophistry.”

How is this sophistry? What pays taxes? Money. How is it legal? By government fiat. This is basic, according to Aristotle and St. Thomas Aquinas.

I find it very interesting that in all this, not one libertarian defines what money is. Again, I ask you: what is money? Is it real wealth or only a representation of wealth?

Paul is also determined, by means of his critical omissions, to misrepresent what I said, about Colonial Scrip. Paul says “I want to address the Continental. Ben says the difference between it and the scrip is the scrip is local. Doesn’t mean a thing.”
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Really? Is that all I said? No. Mostly through a long quote did I highlight the differences between Colonial Scrip and the Continental. I will re-post below my entire post from March 27:
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Colonial Scrip is a type of paper money that functions differently and uniquely, and it was controlled locally. It did not function the same as the Continental. Colonial Scrip was not subject to inflation and various other manipulations. Here is a quote regarding the nature of Colonial Scrip:
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“Unlike the British Bank Notes which were issued by private Bankers, Colonial Scrip was an alternative form of paper money which was issued by the Colonial governments through direct spending on public projects (roads and bridges) and through lending for private projects. The Scrip was issued as a credit instead of a debt and thus the colonies were able to avoid issuing bonds to private bankers to purchase a gold reserve. By avoiding the gold and the debt, taxes remained low and by issuing just enough Scrip to match the volume of trading activity, the value of Scrip remained stable. Ben Franklin’s Pennsylvania Scrip was the most successful of the Colonial Scrip issues. When the Scrip is issued to put people to work, goods and services are created by the work. The workers paid with Scrip can then redeem the scrip for the goods and services available in the local markets. And thus the circle is completed. As long as the Scrip is issued to create work which produces goods and services for redeeming the Scrip, there will never be any inflation or recession. But if Scrip were issued in a careless manner without generating work, or even worse, if counterfeit Scrip enters the market without a matching volume of goods and services to redeem it, the Scrip loses value. This is the cause of inflation. The beauty of Scrip is that it can be created as long as you have persons ready to do work. Consequently, there is never any unemployment under a Scrip system. The money has to wait on the availability of workers. But under the British Bank Note system the opposite is true. Because they issue money as a debt to the taxpayer, the workers have to wait on money to become available.”

It appears that Paul either (1) has notable difficulties understanding plain English, or (2) he is not being intellectually honest.
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Paul says “looking at Ben Yonan, I see his infautation with the whole Austrian liberal economists. Distributism is against Rothbard with his anarcho-libertarianism.” This is a very strange comment, indeed, for Paul to make, since I specifically stated that there are views of Rothbard with which one should disagree. Those objectionable views that I listed include Rothbard’s (a) exaggerated individualism,(b) laissez-faire capitalism, and (c) anarcho-libertarianism.
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One only needs to read my original post about Rothbard to see how utterly false and mischievous are Paul’s comments about me.
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But Paul does not stop here with his intentional mischaracterizations. He goes on to say “In fact, what I see here is a classic debate between distributists and Austrian liberals, with their anti-government rhetoric among other things.” Paul has demonstrated, as we can see from what he stated above in his first sentence, that he has little concern for what someone actually said.
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Furthermore, I am not sure that Paul knows anything of significance about what he calls “Austrian liberals, with their anti-government rhetoric”. Who here, in this thread, has argued from or for an anti-government position consistent with anarcho-litertarianism? No one. But that does not stop Paul from making his wild assertion to the contrary.
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In addition, not all Austrians are anarchists. The majority are not. Ludwig von Mises most certainly was not an anarcho-libertarian.

I ran across a link a few days ago to the Christian Democratic Party USA. They seem to incorporate conservatism – pro life, pro family, pro marriage, etc – with a lot of the economic and fiscal premises of distributism. They’re trying to get their candidate on all the states’ ballots. Have you checked them out? Right now, I think I’m going to do a write-in for their candidate, Joe Schriner. I find myself in agreement with nearly all of their positions.

I want to address the Continental. Ben says the difference between it and the scrip is the scrip is local. Doesn’t mean a thing. The only thing that made the continental worthless was British counterfeiting in the last years of the war, as shown by Bill Still in his most recent video, “The Secret of Oz,” better than his former “Money Masters” video.

BTW, looking at Ben Yonan, I see his infautation with the whole Austrian liberal economists. Distributism is against Rothbard with his anarcho-libertarianism. In fact, the whole “Enlightenment” period is nothing but serious errors in philosophy and anti-Catholic to say the least.

In fact, what I see here is a classic debate between distributists and Austrian liberals, with their anti-government rhetoric among other things. And that is why whatever I agree with Ron Paul, I still totally disagree with his philosophy.

Another question: if money is just a representation of wealth, why should it be valuable in itself (a commodity in other words)? In fact, all money is fiat money in that you have to use the money to pay taxes. Does any dispute this and why?

Maybe we should all go back to define what money is. In Aristotle’s and St. Thomas Aquinas’ definition money is a medium of exchange: a token of wealth, virtual wealth in other words. Do you all agree with this? If not, for those who disagree, what is money?

Grant, I’m not sure what your point is supposed to be. On the one hand, you proffer script under certain conditions: a,b,and c. Well and good. But then you speak of a gold standard under no conditions, and say the bank could go bust. That’s not even an worthwhile argument.

Grant, you said “The paper is no more wealth than the gold.” I think you miss the point of what constitutes practical, economic value. I was contrasting Federal Reserve Notes, whose value is not tied to anything, with gold and silver coin, or precious metals as commodity money.

Actually I do not, but we’ll get to value in a second. You say you are contrasting FED funny money with gold, all fine and good. We agree that gold will retain value whereas FED funny money will not in a debt based system, particularly one which practices FRB. The result is that most money is not exchanged in paper, most money is in promises to repay. The same can be true of a gold standard. The gold will not move but the promises via bank credit will exchange, and when the bank goes bust we lose the gold.
The script or debt free money system is not susceptible to that kind of loss of value provided: a) there is competition in the way of local currencies, gold and silver etc. b) FRB is illegal c) the people are unwilling to allow the government to abuse the currency.

@Ryan Grant, or anyone else who would like to answer, including sharing my doubts on the matter: regarding my query as to the greenbacks, how would a national government with very few employees, and those concentrated in the capital, get this money out to the society at large? And yes, I am assuming a country at least the size of the UK, if not the US. I realize there’s precious little need to de-centralize Monaco.
Viking

Grant, you said “The paper is no more wealth than the gold.” I think you miss the point of what constitutes practical, economic value. I was contrasting Federal Reserve Notes, whose value is not tied to anything, with gold and silver coin, or precious metals as commodity money.
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If you saved a certain quantity of paper money or Federal Reserve Notes (promissory notes) since the 1920’s, for instance, it will have lost 95% of its value. If you save it for another five or 10 years (maybe even 2 years) it problably have lost 100% of its value, both domestically and abroad.
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On the other hand, if you had saved a particular amount of gold or silver during the same period, you would still have something of practical value, both now and in the future, both domestically and internationally. It would still have substantial purchasing value.
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Hence, anyone who retained a sizeable treasure chest of gold or silver would be considered wealthy. A person who saved a stack of green paper would have lost most of his wealth through radical depreciation.

Cato, regarding your post about Rothbard, I think you have over-stated your case when you said “I virtually guarantee you will find nothing objectionable in his writings.” This sounds like you are referring to “all” of his writings. If so, I make the following comments:
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Certainly, Rothbard is a gold mine of economic, political, and historical knowledge, but there exists positions in his writings that should be objected to. For instance, Rothbard advocates an excessive individualism as well as anarchism. Anarcho-libertarianism is a mistaken view because the state is in fact, and contrary to that view, a natural institution.
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Concomitant to the anarcho-libertarian political view is the advocacy of a laissez-faire capitalism, as it is believed that economic structures alone suffice for the functioning of society.
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Nonetheless, Rothbard is very much worth reading, especially concerning, but not limited to, what he has to say about natural law, money, and banking.

Just a quick historical note, for what it’s worth, on the Rothschild family and other economic powers….The separation of ownership from control of enterprises was a device invented by “financial capitalism”, which contributed to the creation of a system of “monopoly capitalism”.
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In the industrialized countries the economic systems were dominated by a handful of industrial complexes. The French economy was dominated by three powers: Rothschild, Mirabaud, and Schneider. The German economy was dominated by two powers: I.G. Farben and Vereinigte Stahl Werke. The U.S. was dominated by two powers: Morgan and Rockefeller. Other countries such as Italy and Britain were dominated by larger numbers.
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These economic lords were not quite all-powerful. In France, Rothschild and Schneider gave way to Hitler’s assault. In Germany, Thyssen gave way to attacks by Flick and Goring. In the U.S., Morgan was unable to prevent the economic swing from financial to monopoly capitalism and yielded to the increasing power of du Pont.
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Shifts in power occur in the complexities of modern life, but the shifts in power by individuals or groups never resulted in a decentralization of control. Rather the bottom line was always a greater concentration of control.

Mr. Grant
As to your remark on the Rothschilds, You’re taking one tiny case and generalizing it, which is a very weak argument, especially since the Rothschilds began operating in a time and place far different from modern America, with many factors that would lead to their decision that don’t necessarily exist today. For instance, almost the only people who owned substantial quantities of gold were nobility (who usually didn’t need to spend much) or merchants (who needed to spend too much to safely carry around). The modern economy is much different, as are policing abilities to prevent theft. So they aren’t the best example. What you need to show is that in the absence of government interference (and I include the interference of “private” institutions created or given special privileges by government), large numbers of banks would engage in this behavior at least to the extent they do now.
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Also, I’m curious as to what you mean by “debt free” money. I think I have an idea based on your references, but i’d rather you give me a detailed explanation than assume I know what you mean and end up being wrong.

Ryan, not all of my comments were directed at what you said. But here is my rather quick response to your post. The best we can do is determine why kind of monetary system works better than others. For example, there are various types of government, and we decide which among them is best. Nonetheless, once that chosen best form of government starts to operate it begins to deteriorate by means of the actions of incompetent individuals, but more so by those who try to change and corrupt it. It’s the same with any economic system.
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First, you said “I believe gold is more susceptible to control by the few than a nationalized currency.” I’m not sure how that would be the case, unless one had a nationalized government, which we now have in the U.S., instead of a federal government as specified by the Constitution. Also, manipulation of the gold standard becomes possible by a national banking cartel, which we now have, as opposed to local private or community run banks. The key is decentralization. Nonetheless, I know people who have saved gold and silver coins for decades and recently cashed them in and made off like bandits. These kind of situations are counter-examples and show how difficult it is to manipulate the value of gold and silver. One can even take his gold and silver out of the country and cash out if he so chooses.
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Next, you said “if the government devalued the certificate to represent a smaller quantity of gold.” Well, I think you are still envisioning what could happen under a different monetary system but with the same type if constitutionally illegal government and banking cartel that currently exists. The reality is that the government with its unconstitutional banking cartel need to be dealt with before any significant change for the better in the economic realm becomes possible. Is it too late for that? That is the million dollar question, but I don’t want my million dollars in Federal Reserve Notes.
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Next, earlier you said you were in favor of competing currencies. However, it would appear that you are contradicting yourself with your negative comments about the gold standard. Gold and silver have traditionally been used as coin as well as commodity money. On what rational basis do we exclude gold and silver from the monetary system? These kinds of money can be controlled locally just as Colonial Scrip was locally controlled. Remember, the early Americans had multiple kinds of money. The evil was for the federal government to create a national bank. That is the legacy of John Jay. Even though Jay was one of the salesmen for the Constitition (i.e. Federalist Papers), he did not stand by or personally believe every thing he wrote. The bottom line is that de-centralized, localized banking protects the original value of gold and silver Certificates.
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At this point, if someone like Ron Paul, who understand money and the banking system, does not get into a position to make sound monetary changes, the only hope we have for an alternative political economy is sometime after everything dramatically crashes, and local communities endeavor to build up a system of economic exchange that works for them. I have my own predictions on what will actually happen.

I see no valid argument against the gold standard that says we shouldn’t go back to it because it is not perfect. Nothing in life is perfect. Let the anti-gold standard folks suggest a monetary system that is perfect.

If nothing is perfect, why should we predicate a system that is perfect? We should predicate a system that works. I believe a nationalized debt free currency, controlled and competing with local currencies and locally established production is more efficient than a gold standard. I believe gold is more susceptible to control by the few than a nationalized currency.

I can’t imagine a system in which the paper that represents gold stores can be de-valued.

I already gave the scenario, in two ways. a)if the government devalued the certificate to represent a smaller quantity of gold, or b) if the government or private banks created a currency bubble by issuing paper dollars (promises) representing gold for which there is no real gold in existence, which creates a bubble and ultimately devalues the paper with respect to the asset it represents, namely the gold.

The alternative to the Gold and Silver Certificates we have now is paper money that is depreciated by the government/Fed at will.

That’s not necessarily the case. As I said, if the government has a debt free currency (which is totally different from the current system where the paper represents less than nothing, it represents money owed) it owes money to no one. That also means that it has no practical use for taxes save one, to extinguish the amount of currency so as to prevent its devaluation.
There is another alternative, self-issued credit for businesses and government. People too, although that is less reliable than a corporation that trades on its reputation.

As long as the Scrip is issued to create work which produces goods and services for redeeming the Scrip, there will never be any inflation or recession.

That is exactly the system I am advocating.

So while the Fed does not literally print dollars, it does have a primary impact on the amount of money and credit available in our economy. Thus through the direction of the Fed, dollars are printed, which have no real value. And the objective is to do things like monetize the debt, Quantitative Easing (LOL), and other such economic nonsense.

Exactly. Complete and total agreement.
Perhaps now is the time to agree to disagree as to whether a Scrip system such as Franklin championed or a gold standard is the solution, and focus more in re with respect to Ron Paul.

This is completely incorrect- Natural Law is the very basis of the libertarian dialect. Murray N. Rothbard, a pillar of libertarian thought, wrote extensively on Natural Law. In his book “The Ethics of Liberty”, Rothbard devotes the first four chapters of his book to Natural Law. He favors the Thomistic tradition of Natural Law, and uses it as the intellectual bedrock for libertarianism. I virtually guarantee you will find nothing objectionable in his writings. He demonstrates, rather convincingly, that libertarian thought is well grounded in Natural Law.

Colonial Scrip is a type of paper money that functions differently and uniquely, and it was controlled locally. It did not function the same as the Continental. Colonial Scrip was not subject to inflation and various other manipulations. Here is a quote regarding the nature of Colonial Scrip:
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Unlike the British Bank Notes which were issued by private Bankers, Colonial Scrip was an alternative form of paper money which was issued by the Colonial governments through direct spending on public projects (roads and bridges) and through lending for private projects. The Scrip was issued as a credit instead of a debt and thus the colonies were able to avoid issuing bonds to private bankers to purchase a gold reserve. By avoiding the gold and the debt, taxes remained low and by issuing just enough Scrip to match the volume of trading activity, the value of Scrip remained stable. Ben Franklin’s Pennsylvania Scrip was the most successful of the Colonial Scrip issues. When the Scrip is issued to put people to work, goods and services are created by the work. The workers paid with Scrip can then redeem the scrip for the goods and services available in the local markets. And thus the circle is completed. As long as the Scrip is issued to create work which produces goods and services for redeeming the Scrip, there will never be any inflation or recession. But if Scrip were issued in a careless manner without generating work, or even worse, if counterfeit Scrip enters the market without a matching volume of goods and services to redeem it, the Scrip loses value. This is the cause of inflation. The beauty of Scrip is that it can be created as long as you have persons ready to do work. Consequently, there is never any unemployment under a Scrip system. The money has to wait on the availability of workers. But under the British Bank Note system the opposite is true. Because they issue money as a debt to the taxpayer, the workers have to wait on money to become available.

Regarding the Treasury and Fed I often speak loosely when I talk of the Fed printing money. I don’t mean that the Fed literally prints physical dollars. So, you are correct, Ryan, to point out the literal difference. It is the Treasury that physically prints money, but it is the privately-owned Federal Reserve that actually dictates monetary policy. So while the Fed does not literally print dollars, it does have a primary impact on the amount of money and credit available in our economy. Thus through the direction of the Fed, dollars are printed, which have no real value. And the objective is to do things like monetize the debt, Quantitative Easing (LOL), and other such economic nonsense. If the wealth or money existed to pay the debt, then there would be no reason to print funny money. And this artificial and fraudulent economic activity is only possible because the value of the Federal Reserve Note is not tied to anything substantial.
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On the other hand, paper money such as the “Silver Certificate” (which was been replaced by the Federal Reserve Note, was tied to an existing and specified value/quantity of silver.
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All this brings us around to my original point, way back when, that one cannot have a sound economy without sound money. We will not have sound money as long as we have the unaccountable Federal Reserve System with its banking cartel.
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A sound money system requires the federal laws be repealed that enable the banking cartel to operate as it does.
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I can’t imagine a system in which the paper that represents gold stores can be de-valued. Gold Certificates and Silver Certificates represent a certain value of existing precious metals whose price does not fluctuate greatly. Of course, an out of control government could loot all the gold and silver and then one is left holding a Certificate he cannot cash in. This possibility is why currencies should be de-centralized and varied as to kinds.
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The alternative to the Gold and Silver Certificates we have now is paper money that is depreciated by the government/Fed at will.
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I see no valid argument against the gold standard that says we shouldn’t go back to it because it is not perfect. Nothing in life is perfect. Let the anti-gold standard folks suggest a monetary system that is perfect. Let them even come up with one that is better than the gold-standard, then we can talk. Meanwhile, Greece is crashing and burning, and the U.S. dollar has been so depreciated by the Fed that there are those in the federal government who are currently making plans for martial law. Everyone who has Federal Reserve Notes tucked under their mattress will someday find them totally worthless. Those who have gold and silver coins stashed will still have something of monetary value.

I’ve admitted more or less everything in the above quote, but you never addressed my argument that in a true free market system (i.e. one without a Federal Reserve-like bank), most banks would not be nearly as willing to lend what they don’t have. Pending a response to that, most if this is at a standstill, I think.

I might have missed it in the confusion and volume of responses. What I need is to go home and source a number of monetary history works I have on FRB in the US and Europe before there were central banks. The Rothschilds for instance, irrespective of any conspiracy theories surrounding them, made their fortunes through FRB, in German countries that had no central banks, Holland which did not have one, and France which did not have one before the revolution. Essentially FRB is a gamble, the bank is gambling that it will have the money in via interest to pay back their depositors when they demand their money, but part of monetary history is that most people only need 10% of their money at a given time. This has historically given banks enormous confidence that they will be able to make it. I’ll try to respond to the rest tomorrow.

I would entertain the idea of competing currencies within the U.S. economy. Inarguably, precious metals as “commodity” money would have the major role to play.

At last we agree.

What has no place in a sound money system are “Federal Reserve Notes” (like the ones in your wallet)

Again we agree.

and a “fiat” money system in which the Treasury and Fed can “print” or creates money out of thin air. This is done, for instance, to monetize the debt, so the government can acquire more loans from China.

This muddles several things together. First, there is a difference between the Treasury printing and the Fed printing. The Treasury is part of the government, the Fed is not. The Federal Reserve Bank is a private bank, not part of the government. So, when the fed prints that means the government has borrowed that amount of money at interest. I agree we should not have a private bank print money out of thin air, but not because printing money per se is necessarily bad. As you said, they are trying to monetize the debt. That is because our entire system is based on debt. Not only that, but because the private banks create major currency and equities bubbles through FRB, the printing (which represents debt the Gov. owes the Fed) is going to bail out the various banking cartels.
Moreover China only owns $1.13 trillion of our Treasury debt. Government debt stood at $14.9 trillion when that figure was given (Nov. 2011). That’s 7.6%. The Federal Reserve on the other hand owns close to that, 1.6 Trillion, the Social Security Trust Fund 4.4 Trillion. 700 million is owned by state and local governments, Japan owns almost the same amount as China, 1 trillion, and the UK owns 429 billion. That means collectively, Japan and the UK own 1.43 trillion, more than what China owns. Now that doesn’t mean anyone owning 1.13 trillion of our debt is no big deal. The fact that the government is in debt at all is a problem, let alone 14.9 trillion!
What you’re not seeing, is that the entire economy is based on debt, because that is how the system is designed. Whenever the government does anything, it borrows. If the FED prints that means the government owes the FED interest on that money. If the government seeks foreign or domestic investors for T-bills it owes. Ultimately, the government is trying to fill a hole with more whole.

The Continental Congress issued paper money during the Revolutionary War. And we know what happened to this paper money, the Continental currency. It depreciated to the point that it even generated the expression “not worth a Continental”.
What you fail to take into account, is that the Continental Congress also issued paper money before the revolution which worked marvelously. According to Franklin: “In the Colonies, we issue our own paper money. It is called Colonial Scrip. We issue it to pay the government’s approved expenses and charities. We make sure it is issued in proper proportions to make the goods pass easily from the producers to the consumers. . . . In this manner, creating ourselves our own paper money, we control its purchasing power and we have no interest to pay to no one.”

The problem came in during the revolution they issued too much, and those who managed Colonial Scrip were either in France or fighting the war. Printing paper money is not per se a problem unless (and its the big unless) there is a way of extinguishing it to keep the currency and exchange rate stable, or conversely, it is a huge problem if your money is all based on debt, as in an FRB system like ours. Yet even if you have a gold standard, if your economy is based on an FRB debt servitude system, it is likewise debt money.

Mr. Grant,“I never said there was a currency that was free from these problems, my point was that gold is not free from that either. And as I said, gold currency can in fact be changed overnight, either by devaluing the paper that represents the gold, or by counterfeiting the gold with gold-plated tungsten, which is becoming more frequent. There is a piece here about that: Gold Plated Tungsten.”
I’ve admitted more or less everything in the above quote, but you never addressed my argument that in a true free market system (i.e. one without a Federal Reserve-like bank), most banks would not be nearly as willing to lend what they don’t have. Pending a response to that, most if this is at a standstill, I think. As for counterfeiting, there are solutions; use silver instead of gold. There’s more of that anyway. A final point is that paper money is worse than gold in this respect, because it can be inflated by literally increasing the supply of paper. Which is precisely what makes it more insidious, by the way, because no one notices the fact that it’s inflated because there’s no fixed amount of anything to measure it against.
–“In fact, it does not seem that you understood my initial point. For centuries gold was not physically traded because of the danger of theft, so transactions were carried out by contract. Later by paper which represented a quantity of gold. The problem in history is that since the gold is stored in a safe place (in a goldsmith’s vault in medieval italian towns, in modern times a bank), so that the bankers realized not many people came for the gold, because the promise of gold was reliable enough to trade the promise rather than the actual gold. In fact, any currency can work based on the reliability of the promise. This allowed the bankers to issue paper promises for gold that did not exist. This is part and parcel of FRB.”
Actually, I think it’s you who doesn’t understand my point. I’ve never tried to argue that gold is a perfect solution. Banks will abuse whatever they can to make extra money, whatever the currency is. My only point is that a gold standard, or some other commodity based standard, is far better than paper. And as Ben Yonan has pointed out, this isn’t just for practical reasons; there are Constitutional reasons to return to a gold/silver/copper/whatever standard. Congress only has the power to “coin” money, and it has no power to create a bank that handles all the currency (non-delegation doctrine, which unfortunately has been all but scrapped by our Supreme Court). Thus, Constitutionally we must be on some coin-based standard, at least as far as the federal government is concerned. On the private level, people can exchange whatever they please.
–“This is completely refuted by the real world, let alone history. Just because there is gold, and it is in circulation, does not mean that it circulates. For people to have money it must be available to be earned. You act like having gold as money automatically makes it available to be earned. That is only true if those who have the gold invest in establishing industries that produce goods. Otherwise it is effectively hoarded, and today we have to consider the use of gold in jewelry, industry and chemical research which remove gold from circulation.”
Fair enough, I am assuming gold will circulate. But why wouldn’t it if it’s the currency? Of course, I’m assuming it’s the only currency. If it wasn’t, and you add, say, silver, then that would circulate. Let’s go your route and say no established currency circulates. So what? People can still barter, I presume, or use whatever other “currency” they like (seashells, for instance). Just because the only government-established currency isn’t circulating doesn’t mean everyone who doesn’t have it is in bad shape.
–In the United States there was a depression from the suppression of Lincoln’s Greenback’s until World War I. The election of 1896 was entirely about this issue, the Populist movement headed by William Jennings Bryan pressed the issue of alternatives to gold because there was not enough money to be earned.
Furthermore, in 1934, the dollar was devalued by over 40% in one day when the price of gold was increased.
Here’s where I wanted clarification earlier, and I’m guessing you didn’t get around to it due to the kerfuffle. So I’ll attack both routes: First, there was no ongoing depression from the end of greenbacks until WWI; that much shouldn’t require factual backing. So I assume what you meant is simply that the end of greenbacks brought about a depression. Okay, so what have you proved? That paper money is a disaster? I suppose you’re trying to argue that greenbacks are necessary to pay people because there isn’t enough gold to go around, but that’s a non sequitur. As I mentioned earlier, you could just add silver coins, or whatever else. As for the price of gold being increased leading to a devaluation of the dollar, you really should pick an example outside of the Great Depression; that was nothing but a long train of government interference on the level of absurdity. It doesn’t prove anything about how a true gold standard would work.
–“Here’s the problem with that. If some bloke borrows money, that dilutes the overall money supply, because the money doesn’t exist. What he borrows is bank credit. That is the reality of FRB. The bank creates an asset off of your promise to repay x amount, and that demand on new money which hitherto did not exist, is now created in the system. That means the private banks, with permission from the government have the ability to inflate the currency. This is why the boom and bust cycle, which is artificial btw, causes such major effects to the economy. This is why you turn on the news and everything is based on the real-estate market. The money that is created disappears when people can’t pay back their mortgage. The bank siezes the asset and recovers some amount, sometimes less than half. That shows up as a loss on their books, but they never had the money in the first place.”
Here again you’re still assuming there’s a lot of fractional reserve banking going on, so again I’ll postpone further argument until you address my argument about why FRB wouldn’t occur (or at least to a much smaller degree) in a free market (not to say Constitutional) system. I will add, however, in case I forgot to mention it earlier, that FRB is hardly necessary to allow banks to lend. Long term investments like CDs are designed to ensure the bank doesn’t have to pay back its creditors for a set period, thus allowing them to lend money long term.
–“This state of affairs cannot be remedied by gold. In a gold economy banks via frb created money that did not exist, priced in dollars, and this caused inflation of the currency. This is what created the roaring 20′s, the increase in credit which put more money out there to be earned and invested in infrastructure. The Depression was caused because the Federal Reserve contracted the supply of paper dollars representing gold which were in circulation, increased reserve requirements which tightened credit and caused the panic to run through the stock market that further contracted credit. When the banks stopped lending the money supply again contracted and people responded by pulling their money out of the bank and put it under the mattresses. There were people producing goods, the things that are real wealth, whereas gold does not have inherent value and is simply a medium of exchange for the real wealth, the stuff we eat, wear, consume and use. The people could not efficiently trade their wealth, because there was not enough money to do so. We had plenty of gold, but the economy stagnated. Why? Because all of our money has been based on debt since 1913, gold or no gold. That’s why FRB has to go.
Again, see my comments regarding FRB. I will point out, however, that the ’20s were a perfect example of not being on a true gold standard, for the precise reason that the Federal Reserve was manipulating the currency. Nearly all instances of extensive FRB can be traced back to government intervention, and the stock market crash of ’29 is a prime example. Murray Rothbard wrote a great book called “America’s Great Depression” that goes into a lot of detail on this subject.
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As a final word, I would like to say that you shouldn’t bother responding to me every time out of a sense of obligation. I would much rather you make a complete response all at once than go piecemeal. I only respond this way because I have to do it when I can, and frankly I’d probably forget otherwise.

Given 19th century America’s reluctance to have such a huge number of national governmental employees on a permanent basis, how exactly would the greenbacks have been continued after the war was over?

The Green backs continued because the spending of debt free money had given real benefits, and Lincoln decided to keep them permanently.

I might add that distributism, as I understand it, has a similar animosity towards such centralization.

It depends. You centralize according to subsidiarity, the smallest possible unit carries out a given function. In the case of currency, it could be centralized sensibly in a small country, but in a country such as the US you need competition in currency to prevent the government from screwing it up. A state government can issue money, and tax it back to prevent hyper-inflation Wiemar style.

Paul,
Much of what you said in your first reply (the one to which I said responding would be a waste of time) has been addressed by Ryan Grant, so I’ll assume that’s out of the way. You did, however, say one thing there that I want to address:“So-called “government interference” is actually private bankers’ interference, and government allowing them it.”
I’m going to assume you haven’t read any of my debate with Ryan Grant, since several of your remarks, including this one, imply as much. My answer to him was that these “private” institutions aren’t really private. They aren’t run by government, but they’re established by governments for government purposes, or in the case of truly private banks given the power to manipulate currency, they are not private to that extent. A truly private entity could not inflate money at whim, after all, because that would be the textbook definition of counterfeiting. I think it’s better to think of such banks as being governmental bodies which are not, in theory, answerable to the government (in practice, they must be, but in theory they have discretion to do whatever they please). So I don’t consider this argument to be very problematic for my view. Incidentally, another thing I should point out is that when I say “gold standard,” I’m not referring to a gold-only system so much as any system based on precious metals, usually including at least gold and silver. It’s just that pretty much all such systems have used at least gold, so it’s an easy shorthand. Now onto your other points.
–“As for your other idea that money must breed more money, that is just wrong, in the Catholic Church’s eyes. That is plain usury. You just gave a reason why the rich can just live their idle lives and just do nothing, other than gaining their wealth by usury.”
I assume this is addressed to me, but I’m not sure what it refers to. I certainly never used the term “breed” in reference to money, so you’ll have to be more specific before I can fully respond. For now I’ll just say that I’m not sure what definition of usury you’re using. Does it include all interest, or only “excessive” interest? If the former, say goodbye to banks, because like every other business they exist to make a profit, and they can only do so by lending at interest. So far as I know (correct me if I’m wrong), that’s never been condemned wholesale. If the latter, I don’t know how your objection holds up, because money could still “breed money” with a small interest rate.
–“Saying someone is ignorant isn’t name-calling; it’s excusing the person on account of some lack of knowledge. What would happen if I called you “of little wits”? That would really be name-calling, and insulting. I myself am ignorant on a lot of things still.”
I hesitate to keep this topic going, but surely it was obvious that when I said you were “insulting” I was referring to your continued use of the term “goldbug.” That and your use of all caps, assuming you don’t know how to use embedded modifiers to bold/italicize your text. At any rate, I’m willing to drop it; I just wanted to point out that my comment was not aimed at what you think it was aimed at.
–“Joshua, can you absolutely prove that the gold standard, when “without government interference,” wasn’t manipulated by private bankers? . . . In fact, the bankers would be very happy if we went back to the gold standard. Bankers AND governments aiding them: it’s always been the case.”
See my comments above regarding private manipulation. As for the last statement, it’s not the banks I’m worried about as far as the currency goes; the banks will do more or less the same thing regardless of the currency system (the legal system is another matter). What I’m worried about is the government. Paper money that can be inflated at will makes it much easier for government to go into debt and fund it with rapidly devaluing currency. Ben Yonan mentioned the example of the Continental dollar, which is a classic case. Even if banks engage in fractional reserve banking under the gold standard, that doesn’t come anywhere close to giving governments the same leeway.

I would entertain the idea of competing currencies within the U.S. economy. Inarguably, precious metals as “commodity” money would have the major role to play. What has no place in a sound money system are “Federal Reserve Notes” (like the ones in your wallet) and a “fiat” money system in which the Treasury and Fed can “print” or creates money out of thin air. This is done, for instance, to monetize the debt, so the government can acquire more loans from China.
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Also, historically, gold has greatly facilitated trade between countries on the same standard.
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There were three general types of money in the American colonies: Commodity Money, Specie (Coins), and Paper Money. Commodity money was used when cash (coins and paper money) became scarce. The Continental Congress issued paper money during the Revolutionary War. And we know what happened to this paper money, the Continental currency. It depreciated to the point that it even generated the expression “not worth a Continental”. Early Americans learned of the evils associated with paper money, which is why the Constitution only gives to the federal government the power “To coin Money”, and the Constitution further stipulates that “No State shall…make any Thing but gold and silver Coin a Tender in Payment of Debts”. Thomas Jefferson, among other early Americans, have more than a few things to say about the evils of paper money.
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Thus, much of what is being done currently by the federal government and Federal Reserve concerning money is illegal according to the Constitution. What this mess proves is that the only thing we learn from history is that we don’t learn from history.

Ryan Grant, perhaps my earlier question was answered by someone but I missed it for some reason. But I’ll assume it hasn’t been. Here it is again: the greenbacks were issued in response to the need for a large army. Given 19th century America’s reluctance to have such a huge number of national governmental employees on a permanent basis, how exactly would the greenbacks have been continued after the war was over? I might add that distributism, as I understand it, has a similar animosity towards such centralization.
Viking

At least we know that superstitious beliefs are alive and well in today’s world. That is, animosity toward the gold standard is inspired by the superstition that all-powerful governments can create wealth out of scraps of paper.

That’s a straw man, frankly. No one who argues for a nationalized debt free currency argues the government creates wealth out of paper. The government in issuing a debt free currency facilitates the process which creates wealth, exchange of capital that has been transformed into wealth. The paper is no more wealth than the gold, it is the things we make that are the wealth, and trading for them effectively creates prosperity, not a shiny yellow metal which most of us have little practical use for except as wedding rings and teeth. We, or at least I, am not arguing that gold cannot still be used as an asset, but as the sole currency is woefully inadequate.

Since he’s officially out, I didn’t take the time to examine him. He is, however, like Santorum and Gingrich, a party man. Like most repubs, he is big on spending and doesn’t grasp our economic and financial situation, or the grave problems facing the country. He also supports cap and trade and is a follower of the whole global warming hysteria. On the other hand he is fluent in mandarin Chinese and has a long history of foreign policy experience, both as ambassador to Singapore for HW Bush and ambassador to China for Obama. So unlike the current crop he does understand the Chinese, but in the end since his history suggests he revolves around the party, I could scarcely see him addressing real issues in foreign policy. Not to mention he supports the war on terror, which for me, is as big a deal breaker as abortion.

Firstly let’s cool down, written communication can come off cold and accusatory when it is not meant to be. I don’t believe anyone here hates the other and wants to treat the other as an ignoremus.

Next, a clarification needs to be given, America was on a gold standard until Lincoln. Lincoln issued the green back, which was debt free fiat money, controlled by taxing it back to prevent too much of it from devaluing the currency. This created a fairly prosperous run for as long as it was issued, until the end of reconstruction. Lincoln issued these during the civil war, partly to finance it, partly because he discovered the secret of money, money just represents production. Then opposed he the National Bank act which he had formerly supported, so FRB was officially illegal. After Lincoln’s assassination Johnson passed the act, which allowed for FRB and then instructed the treasury to start retiring the green backs from circulation so that they would virtually disappear at the end of reconstruction.
Garfield campaigned on restoring the greenback but was assassinated shortly after becoming president. Silver was not allowed to be minted as a currency. It was used industrially, but only gold was permitted by the Coinage act of 1873. Gold was the only legal tender. This is why the Populist movement advocated what is called in monetary history the “Free Silver” initiative, which Bryan ran on in 1896. So with the exception of the Greenback, the history of the 19th century is a gold standard.

Joshua, can you absolutely prove that the gold standard, when “without government interference,” wasn’t manipulated by private bankers? I tell you this: the history of the gold standard is filled with such manipulations by bankers, NOT by governments only; governments just sat by as the private bankers did whatever they wanted, or made legislation in favor of them. In fact, the bankers would be very happy if we went back to the gold standard. Bankers AND governments aiding them: it’s always been the case.

Saying someone is ignorant isn’t name-calling; it’s excusing the person on account of some lack of knowledge. What would happen if I called you “of little wits”? That would really be name-calling, and insulting. I myself am ignorant on a lot of things still.

You’ve done no better, as I mentioned earlier, but in light of your apology, I’ll write a more complete response later. But one more use of the term “goldbug” and I’ll just ignore everything you say. Such name-calling doesn’t belong in a civilized debate.

As for your other idea that money must breed more money, that is just wrong, in the Catholic Church’s eyes. That is plain usury. You just gave a reason why the rich can just live their idle lives and just do nothing, other than gaining their wealth by usury.

Sorry for my tone, but apparently you say things so ignorant IMHO that I wonder if you were sincere yourself. Take your example that America was on the gold standard in the 19th century. Why could I not shoot it down with a gratuitous denial? You didn’t show any proof that it was on gold, only a mere assertion.

And it seems to me that Ben Yonan has read false histories of the gold standard.

Joshua:
“Who said gold was the only stable money system? And actually I can point to periods where the gold standard brought prosperity. A good chunk of 19th century America for starters, and also in England (I forget the exact years) before the government decided to meddle. Any time the gold standard is free from government interference it works just fine. On the other hand, all your supposed examples of the failure of gold are really the failure of government intervention. And please don’t accuse “goldbugs” of something you’re equally guilty of, I.e. not pointing to specific evidence or examples. The best you’ve done is quote a website that quotes Aristotle.”

19th century America on gold standard? Don’t make me laugh. America WAS NOT UNDER A GOLD STANDARD, but used GOLD and SILVER, and greenbacks. Don’t use examples of gold and silver coins to prove gold is stable as money. All your examples can be met with a gratuitous denial, since the burden of proof is on you and all goldbugs that a gold only money system actually works as intended. So-called “government interference” is actually private bankers’ interference, and government allowing them it.

Again I challenge you to show me a truly gold standard system (no silver or greenbacks with it, JUST GOLD) that gives prosperity to the people. And don’t give false examples like 19th-century America.

When we have advanced to the stage where our technology allows us to produce wealth 20 to 30 times more efficiently than did our forefathers at the time of the War of American Independence, which we now have, and still have many amongst us living in poverty while a very few own almost the total of our wealth and the means of producing that wealth, it ought to tell all of us that there is something drastically wrong with our economic system.

The first step to correcting our economic system is to better understand it. It is my view that to do so we must first answer the question: Is the Economy Demand Drive or Supply Driven? It is also my view that the answer is best found in the national accounts for the Great Depression, the most instructive period of our economic history. Using the record from this event as the means of understanding our economic system is in accord with Lord Kelvin’s admonishment:

“…when you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot measure it, when you cannot express it in numbers, your knowledge is of a meager and unsatisfactory kind; it may be the beginning of knowledge, but you have scarcely, in your thoughts, advanced to the stage of science, whatever the matter may be.” So to begin:

Conventional economics follows from that defined as classical economics by Keynes. The key element of this economics is Say’s law, which simply stated is that: supply creates its own demand. According to this idea, all that is needed to increase demand is to increase supply. This was most effectively proffered by the Reagan administration in the 1980s as supply side economics. And it is still the prevailing though, as evident from the trillions of dollars recently passed to the mega corporations that were to create jobs and grow the economy.

However Keynes in the 1930s reminded us that: “Consumption – to repeat the obvious – is the sole end object of all economic activity” and then came forth with the admonition: “If the leaders of capitalism insisted on treating problems of demand as though they were problems of supply, and on screwing down the wages of workers in order to restore profits, then a class war could easily arise which would vindicate Marx’s prophecy. But such a result would be correctly attributable to error or stupidity: it was not necessary to the survival of the capitalist system that it should act in such a way as to precipitate its own downfall.”

What Keynes told in the 1930s is obviously contrary to what the Reagan administration told in the 1980s and which still holds as governing doctrine. But Keynes also told in the 1930s that where the aggregates of supply and demand cross is not necessarily where we have full employment. This has been proven throughout much of history and seemingly with a vengeance in the 1930s and now again in this most recent economic crisis.

Obviously if one can only gain ones livelihood from employment then it stands to reason that if one is unemployed, one becomes destitute. Hence employment becomes an integral part of supply and demand. So it also behooves us to resolve the relation between employment and supply and demand. We can begin with the obvious – that it is money that creates (economic) demand for without money there can be no demand in our modern industrialized world.

The basic mathematical expression for describing the economy as demand driven is: PQ=VM where P is price, Q is production (products and services), V is the circulation of money (the times it turns over each year), and M is the money quantity (M is taken as the Fed M1 although not strictly correct, it is pretty close for the1930s). PQ is for all practical purposes the Gross Domestic Product although back in the 1930s the Gross National Product (GNP) was the only statistic used. So that is what I use next: GNP=VM. From this we get the differentials (yearly incremental change): ∆GNP=V∆M. These equations ate in fact mathematical expressions of Keynes law of effective demand.

Conventional economists though express the components constituting Keynes law of effective demand as MV=PQ. They refer to it by various names, but most commonly as the Equation of Exchange (and the Quantity Theory of Money). There are a couple of inferences drawn from this equation as it is formed and titled by conventional economists: from the former it is Q that draws M; and from the latter, changes in M are solely in corresponding changes in P. This says that the Equation of Exchange is a mathematical identity between M and P. A further point drawn from conventional economists is that a growth in Q is the cause for a growth in M.

What I have described here is fundamental to the privately managed credit monetary system. To be a little more explicit: when the entrepreneur does not have sufficient cash to produce his product his friendly banker issues him a credit for the time needed to bring his product to market; and after the product is sold, the entrepreneur from his profits retires the credit plus some nominal fee (interest) for this service. If entrepreneur money demands increase over time then there is growth in the national product. This is the fundamental theory on which the financial sector of our economic system is modeled.

To see what actually happened during the Great Depression may help to clear the mystery of what drives the economy. We can begin with the national accounts for the years 1933 to 1937. Over this four-year period, GNP grew from $56.00 billion to $90.80 billion or at a yearly rate of $8.70 billion, real GNP grew from $56.00 billion to $82.34 billion or at a yearly rate of $6.58 billion, and M (M1) grew from $19.17 billion to $30.69 billion or at a yearly rate of $2.88 billion. Also during this period, prices rose about 10 percent or at an average yearly inflation rate of 2.5 percent. In percentages, real GNP grew on average at about 9.5 percent per year and GNP at about 11.8 percent per year. The mathematical expression for this growth in money terms is: ∆GNP=3.02∆M,

Clearly, from 1933 and 1937 there was a very rapid growth in production and in corresponding consumption and investment with only nominal inflation. This real growth clearly evidences that the Equation of Exchange did not function as an identity between M and P, as posited by the conventional economists, but rather as a behavioral function between M and Q with only a nominal effect on P and as shown below, caused no change in V. That is to say: the growth in production expressed a strong correlation with the growth in money quantity.

We cannot yet say “response to”. So the question: Was this amazing growth in these first four years of the recovery in response to growth in money quantity or was it production that drew this money from the friendly bankers?

Obviously the increased production was in the private sector and the money came from the (private) banks. But also obvious is that the money came first and in the net only to the Federal government. This we see from the increase in the Federal debt of $13.62 billion in comparison to the increase in the money quantity, $11.52 billion. In fact this difference of $2.12 billion was, in the net, money extracted from the economy by the friendly bankers (included is the privately owned Fed), but more on that below. There is the further point that prior to 1934 this $11.52 billion did not exist. As to where it came from, some might say: out of thin air. But on the source of this money, more is told below.

The Federal government then used this $11.52 billion to purchase Hoover Dam, the Tennessee Valley Authority, and a host of other major and minor infrastructure works as well as paying for the Works Progress Administration (WPA) and Civilian Conservation Corps (CCC). Clearly this money the Federal government spent placed a demand of $11.52 billion on the private sector for their products and services; and lo and behold there was no lacking in the private sector to meet this demand. This in itself suggests that where an economic demand is made in a market economy not fully employed there are many willing to create the supply.

But there is more, with the $11.52 billion received from supplying the Federal government with Hoover Dam, the Tennessee Valley Authority, etc., the private sector made purchases for consumption and investment elsewhere, to the tune of $23.27 billion. These purchases were obviously supplied and at prices not too different from those in 1933, as that is the record in the national accounts.

Clearly none of this $23.27 billion used for these additional purchases came from the bankers, elsewhere, or in any other manner such as an increase in V, as V was 0.34 in 1933 and again 0.34 in 1937. In fact as noted above and again below, the bankers extracted $2.12 billion from the economy, which if it had not, there would have likely been additional purchases of $6.04 billion in consumption and investment and corresponding additional employment!

From this brief analysis, it would seem difficult to argue otherwise (but don’t count the shills and the dogmatists out in doing so) than that a demand will be supplied in a market economy until the economy has reached the full extent of its resources, mainly at full employment; and needed to make that demand, is money plus the request for the product and/or service.

What is also evident from the national accounts of the 1930s is that a contraction of the money quantity also correlates with a reduction in economic activity: In 1929, GNP and M1 were respectively $104.40 billion and $26.18 billion; and in 1933 they were $56.00 billion and $19.17 billion. There was also a drop in prices such that the real GNP in 1933 was $74.20 billion and a significant slowing in V: from 3.99 in 1929 to 2.89 in 1933. Obviously the same forces were at work between 1929 and 1933 and between 1933 and 1937 only in opposite directions. But the affects were different, as we see in V, but that was only in the magnitude of the influence of ∆M, not in its function.

Clearly from the numbers, deflation had a greater rate during the decline than inflation had during the recovery. Also there was a greater tendency to hoard during the decline, as evident from the decrease in V, which compounded the severity of the decline on the public at large. The decline obviously was by far the most distressing part of the Great Depression. The obvious conclusion: If a people wish not to have these distressing conditions they ought not to permit the monetary authority to contract the money quantity.

But, as Keynes also reminds us that this was known: “…since the age of Solon at least, and probably, if we had the statistics, for many centuries before that, indicates what a knowledge of human nature would lead us to expect, namely, that there is a steady tendency for the wage-unit to rise over long periods of time and that it can be reduced only amidst the decay and dissolution of economic society. Thus, apart altogether from progress and increasing population, a gradually increasing stock of money has proved imperative.”

It should be known too that during the 1930s there were essentially only three processes by which money was removed from the economy: the Federal government running a budget surplus, as it did in 1929 and 1930; loss of unsecured bank demand deposit accounts in consequence of bank failures, as was the main source of the money contraction from 1930 to 1933; and the commercial banks retiring loans beyond their issuance as appears to have occurred throughout the 1930s. From this it should also be obvious that the difference between the increased Federal debt and increased money quantity during the recovery years, the $2.12 billion, was solely the consequence of the commercial banks’ loan retirements exceeding their loan issuances

We can write an equation similar to that used to express Keynes law of effective demand for the response in employment to the created money quantity during the recovery years of the Great Depression. For example in 1933 employment was 38.76 million and in 1937 it was 46.30 million. That is an increase of 7.54 million over this four-year period or a rate of increase per year of 1.89 million, which comes to about 4.44 percent per year. However, this is not the full story as during this period, probably over 3 million were employed in the WPA and CCC, Hence, the increase in employment was more likely a little over 10.5 million and the actually rate of increase was more like 6.25 percent per year.

At the end of 1937 there was still, according to the national accounts, 7.7 million unemployed. The unemployed (expressed in percent) were in part a consequence of the growth in population with the labor force growing from 51.84 million in 1933 to 54.32 million in 1937. But I believe they were also in part in counting those with the WPA and CCC as still unemployed. When these numbers are taken into account, the actual unemployed would be about 4.7 million or the unemployment rate closer to 9.9 percent.

What can be drawn from this brief analyses is that each injection of $1.0 billion increased GNP by $3.02 billion and employment by 0.91 million (includes those in the WPA and the CCC). Obviously to reduce unemployment to about 3.5 percent, a reasonable number, would have required increasing employment by 6.4 percent or about 3.4 million, which would have required injecting an additional $3.74 billion into the economy. In other words, the average annual addition to the money quantity would not have been $2,88 billion but rather nearer $3.81 billion if the nation had full recovery in 1937. During the pre-war years, inclusive of 1939-1941, that is more or less what happened. But it was in a haphazard manner not in accord with the record put forth in the national accounts.

An obvious further point is that the Federal government could have created the money that brought the economy out of the Great Depression through account entries rather than paying the private banking system under the auspices of the Fed to do it through account entries. Had the Federal government done so and only created the money quantity it issued as debt, the unemployment would have been about 5.5 percent at the end of 1937. One may view this as not an end to the Great Depression in consequence of the WPA and CCC still active and the presence of union strife but at that rate of injection, unemployment would have been near 3.5 percent some time in 1938. It is noted that Germany, with a higher unemployment rate in 1933, had achieved full employment by the end of 1936.

Obviously the implications from this analyses, as they relate to our monetary system and its management, are immense, beyond the mere fact that the Federal government should create the nation’s money through its own accounting process rather then have the private banks do it as such great cost, not simply monetarily but socially too. Incidentally, it is congresses’ charge “to coin money and regulate the value thereof”, as set forth in the fifth clause enumerating congresses’ powers. For congress to do otherwise, as it has for almost the total of the nation’s history is to abrogate its authority and responsibility. That is as much a fault as to overreach it powers, as it has done on so many occasions, mainly beginning with the Great Depression but then again with the Great Society programs.

Mr. Grant, in the hopes you can reply before I write up a full response, I’d like a clarification. You say there was a depression due to the suppression of greenbacks until WWI. Are you saying the depression lasted that long, or merely that greenbacks were suppressed that long?

Paul,
Who said gold was the only stable money system? And actually I can point to periods where the gold standard brought prosperity. A good chunk of 19th century America for starters, and also in England (I forget the exact years) before the government decided to meddle. Any time the gold standard is free from government interference it works just fine. On the other hand, all your supposed examples of the failure of gold are really the failure of government intervention. And please don’t accuse “goldbugs” of something you’re equally guilty of, I.e. not pointing to specific evidence or examples. The best you’ve done is quote a website that quotes Aristotle.
I’ll have to address Ryan Grant later when I have more time.

It seems to me the goldbug advocates can’t cite one single instance of a gold money system bringing prosperity to the people. On the contrary, there are a lot of examples where the economy collapsed as a result of relying only on gold as money.

At least we know that superstitious beliefs are alive and well in today’s world. That is, animosity toward the gold standard is inspired by the superstition that all-powerful governments can create wealth out of scraps of paper.

Ryan, you said fractional reserve banking has existed for 400 years. While I have not verfied that assertion yet, I will assume here that it is accurate and respond accordingly.

The Bank of England’s 1694 charter allows it to lend at a 2:1 ratio and collect interest on “all monies which it generates from nothing.”

Fractional reserve banking was not allowed in the U.S. until the banking industry pressured the federal government into passing laws that allowed such. But that is not my main point.

You are making our case for us. It is the power that wealth in an unregulated market creates that allows for the establishment of corporatism. It also took government to stop it, for a time. With Hamilton and the first bank of the US fractional reserve lending was practiced from 1800 until 1830 or so, when Andrew Jackson refused to renew the bank’s charter, and made his mission in life destroying the bank. All European economies in the 18th century onward have practiced FRB, with gold standards. In the 1870’s, FRB was legalized again, (under a gold standard) and this continued until Nixon took us off a gold standard. FRB is not restricted by the type of currency, its workings remain the same.

Your point regarding fractional reserve banking and issuing more notes than are actually backed by gold is correct as far as it goes, but the problem is that there simply is no currency that is not subject to these problems, while gold and other commodity currencies at least lack the extra evil of paper money–that the actual amount of currency in existence can be literally changed overnight.

I never said there was a currency that was free from these problems, my point was that gold is not free from that either. And as I said, gold currency can in fact be changed overnight, either by devaluing the paper that represents the gold, or by counterfeiting the gold with gold-plated tungsten, which is becoming more frequent. There is a piece here about that: Gold Plated Tungsten.
In fact, it does not seem that you understood my initial point. For centuries gold was not physically traded because of the danger of theft, so transactions were carried out by contract. Later by paper which represented a quantity of gold. The problem in history is that since the gold is stored in a safe place (in a goldsmith’s vault in medieval italian towns, in modern times a bank), so that the bankers realized not many people came for the gold, because the promise of gold was reliable enough to trade the promise rather than the actual gold. In fact, any currency can work based on the reliability of the promise. This allowed the bankers to issue paper promises for gold that did not exist. This is part and parcel of FRB.

It harms no one. If chickens and shoes are relatively cheaper as compared to gold, they are still equally valuable relative to each other, so no harm is done to those who barter. But of course your reasoning assumes there will be people who don’t have money, which is completely unfounded.

This is completely refuted by the real world, let alone history. Just because there is gold, and it is in circulation, does not mean that it circulates. For people to have money it must be available to be earned. You act like having gold as money automatically makes it available to be earned. That is only true if those who have the gold invest in establishing industries that produce goods. Otherwise it is effectively hoarded, and today we have to consider the use of gold in jewelry, industry and chemical research which remove gold from circulation. In the United States there was a depression from the suppression of Lincoln’s Greenback’s until World War I. The election of 1896 was entirely about this issue, the Populist movement headed by William Jennings Bryan pressed the issue of alternatives to gold because there was not enough money to be earned.
Furthermore, in 1934, the dollar was devalued by over 40% in one day when the price of gold was increased.

Second, if a poor bloke borrows money in an economy where money is not evenly distributed, then the economy grows, you still don’t have a problem. His borrowed money is still the same amount, and has the same relative value it had before the economic expansion. The only reason why he wouldn’t have enough money to pay back his loan is through his own fault or an unforeseen disaster (inability to work, theft, etc.). But that has nothing to do with there not being sufficient currency.

Here’s the problem with that. If some bloke borrows money, that dilutes the overall money supply, because the money doesn’t exist. What he borrows is bank credit. That is the reality of FRB. The bank creates an asset off of your promise to repay x amount, and that demand on new money which hitherto did not exist, is now created in the system. That means the private banks, with permission from the government have the ability to inflate the currency. This is why the boom and bust cycle, which is artificial btw, causes such major effects to the economy. This is why you turn on the news and everything is based on the real-estate market. The money that is created disappears when people can’t pay back their mortgage. The bank siezes the asset and recovers some amount, sometimes less than half. That shows up as a loss on their books, but they never had the money in the first place.

This state of affairs cannot be remedied by gold. In a gold economy banks via frb created money that did not exist, priced in dollars, and this caused inflation of the currency. This is what created the roaring 20’s, the increase in credit which put more money out there to be earned and invested in infrastructure. The Depression was caused because the Federal Reserve contracted the supply of paper dollars representing gold which were in circulation, increased reserve requirements which tightened credit and caused the panic to run through the stock market that further contracted credit. When the banks stopped lending the money supply again contracted and people responded by pulling their money out of the bank and put it under the mattresses. There were people producing goods, the things that are real wealth, whereas gold does not have inherent value and is simply a medium of exchange for the real wealth, the stuff we eat, wear, consume and use. The people could not efficiently trade their wealth, because there was not enough money to do so. We had plenty of gold, but the economy stagnated. Why? Because all of our money has been based on debt since 1913, gold or no gold. That’s why FRB has to go.

As for your other points, I’ll have to address them another day, I simply don’t have time to get to it all now.

Actually, no. If there are only gold and silver coins in circulation as money, there is bound to be some who have none whatsoever, since their availability is quite limited. Meaning there will be people with no money whatsoever.

Second, you’re making money to be something it isn’t. Money isn’t fruitful; it’s only a token of wealth, a legal fiat. Saying that you want your money to be worth more is basically saying you want a system with usury, which is condemned by the Catholic Church and the best philosophers. Money needs to be stable so that it can buy the same amount of goods, neither too much (deflation) nor too little (inflation). Both are evils.

Lastly, you have no idea what you’re talking about when you say all fiat money have been frauds. There are various periods of history when paper or other metals than gold were used successfully as in ancient Rome or colonial Massachusetts. Money is by essence fiat; if the ruler changes his mind, then the money will be useless, even gold money (though not of itself). In fact, it is so right now; you can’t say gold can’t be used to be pay off debts legally.

Actually they strengthened my opposition, but I haven’t had a chance to respond because I work hard for capitalism but it doesn’t work hard for me so I have to work two jobs. I hope sometime during the week to address this but what has been said is a huge chunk to wade through.

Paul,
Now that your original post with the URL is up, I’ll respond to it.
–“Aristotle gave us the science of money in the 4th century B.C. which he summarized as: “Money exists not by nature but by law!” So Aristotle accurately defines money as a legal fiat.”
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A more correct statement would be that money exists not by nature but by convention. No government is necessary to the establishment of a currency. It merely requires people to agree on what is considered money.
–“As for gold, most systems pretending to be gold systems have been frauds which never had the gold to back up their promises. And remember if you are still in a stage of trading things (such as gold) for other things, you are still operating in some form of barter system, not a real money system, and therefore not having the potential advantages as are available through the American Monetary Act!”
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And using fiat money isn’t trading things for other things? Whether I use gold coins or paper bills, I’m trading something for something, so I don’t see the point of that statement. And while it may be true that most gold systems have become “frauds” eventually, all fiat systems have been frauds ab initio.
–“And finally as regards gold and silver: Please do not confuse a good investment with a good money system. From time to time gold and silver are good investments. However you want very different results from an investment than you want from a money. Obviously you want an investment to go up and keep going up. But you want money to remain fairly stable. Rising money would mean that you’d end up paying your debts in much more valuable money. For example the mortgage on your house would keep rising if the value of money kept rising.”
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There are several problems here. First, I don’t want my money to be stable; I want it to be worth more over time so I can get more stuff (not being materialistic here, just stating the obvious). The fact that you pay more value for a debt than you borrowed can be taken care of by basing the interest rate on the loan on the rate of inflation/deflation, so that’s not a problem. Aside from that though, it’s still better for money to appreciate in value. Why? Let’s say I have $100, and I borrow $50 more to be paid back in one year at 10% interest. That means I need to pay back $55. Now, let’s say that the value of money increases two-fold during that period. That means I had the $100, plus the $50, and perhaps more if I used the borrowed money in a good investment, and have to pay back $55, which are all now worth $200, $100, and $110 respectively. At the end of the day, I have to pull the extra $10 worth from my $200, leaving me with $190. See, I’m still richer than when I took out my loan! So money increasing in value is not a problem when it comes to debts.
–“Also, contrary to prevailing prejudice, gold and silver have both been very volatile and not stable at all. Just check out the long term gold chart.”
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Yeah, that’s true, but why aren’t they stable? Because the money supply isn’t stable and the price is based on money. Besides, this is a complete non-starter because the instability of the value of gold and silver is based on their use as assets and investments rather than money. If you had a set of gold and silver coins in circulation, they wouldn’t fluctuate like that.

Mr. Grant,
You seem to have conflated Ben Yonan and myself. Nevertheless, I’ll respond to the whole bit.
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Your point regarding fractional reserve banking and issuing more notes than are actually backed by gold is correct as far as it goes, but the problem is that there simply is no currency that is not subject to these problems, while gold and other commodity currencies at least lack the extra evil of paper money–that the actual amount of currency in existence can be literally changed overnight. Even Ron Paul has never argued that a gold standard would be a cure-all, just that it would be a huge improvement over paper money.
–“This proves me correct rather than incorrect.”
Only because you assume the very thing you have to prove, which is that a stable supply of gold in a growing economy causes all the problems you mention. Instead of addressing my arguments as to why that is not the case, you simply continue to assume it is the case as if there were no debate on the point. Yes, decreases in the prices of goods benefit those who have money, but that’s not a bad thing. It harms no one. If chickens and shoes are relatively cheaper as compared to gold, they are still equally valuable relative to each other, so no harm is done to those who barter. But of course your reasoning assumes there will be people who don’t have money, which is completely unfounded. Your continuing assumption that a growing economy coupled with a stable money supply will inevitably lead to an inability to pay debts and such tells me I need to go a little deeper in my explanation.
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A hypothetical economy has 100 people, 10,000 goods, and 1,000,000 units of currency, and for sake of simplicity we’ll say all are equally distributed, and all goods cost exactly 100 units of currency. The economy grows such that there are now 200 people, 20,000 goods. Each of those goods is now worth 50 units of currency, which are likewise equally distributed. So far, no problem. But let’s assume one of our initial 100 citizens borrowed 50 units of currency so he could, say, build a factory to produce the extra goods now in the economy. If, by the end of the expansion to 200 people, the currency is still somehow evenly distributed even without this fellow paying back his creditor, that means he now has only 50 units left to pay back his debt. This seems like a prelude to bankruptcy, but because there are also additional goods in the economy, he can sell some or barter off his debt. Of course, you could argue my example is overly simplistic, because only one person went in debt and the currency was distributed equally. My first response would be that no society will ever be so indebted that everyone owes everyone else. It can’t happen, because by its own terms it violates the law of non-contradiction–debt can never exceed the total value of goods/currency in circulation, because one can’t borrow what isn’t there. Second, if a poor bloke borrows money in an economy where money is not evenly distributed, then the economy grows, you still don’t have a problem. His borrowed money is still the same amount, and has the same relative value it had before the economic expansion. The only reason why he wouldn’t have enough money to pay back his loan is through his own fault or an unforeseen disaster (inability to work, theft, etc.). But that has nothing to do with there not being sufficient currency.
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I can’t think of a reason why expansion of an economy would lead to what you say it does, so you’ll have to clarify further what you have in mind if you want to continue. Besides, you still have the problem of all currencies being either inexpandible, or inflatable. Is gold, even in your view, worse than the theft of wealth through inflation?
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Regarding your hypothetical Rockefeller, it’s not true that the value of gold would go up just because he isn’t spending all of his, because he still has to spend some of it, and it there is always money not in circulation. You act like only rich people have money in reserve, but that’s not true, and even if it were that money is still being used, as in your example, to lend out.
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Which brings me to the next point you make. You discuss fractional reserve banking, but as you mention, this partially requires a central bank, but why should there be a central bank at all? In a free market, a bank might insure another bank against runs, but like all insurance this will have to be paid for, and it wouldn’t work at all like our system. So you’re starting off with flawed (or at least unsupported and unshared) premises. But let’s assume that fractional reserve banking would occur regardless. Your language seems to indicate that the gold people would put in the bank could then be “spent” by the bank rather than loaned out, which of course is nonsense, so I’ll assume you mean the banks would loan their gold to the government in return for bonds or what have you. You call this “phony credit,” but that’s not true, because all of those things would likewise be exchangeable for gold, as evidenced by the fact that it took gold to get them in the first place. It’s not as if “assets,” to use your own term, are worthless because they aren’t gold.
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And the system would only default if there were no growth in the economy and everyone in the system defaulted on their loans at once, the value of which loans would have to be greater than the value of the economy. A growing economy means there will actually be enough money to pay back the loan plus interest for everybody, and it will never be the case that everyone defaults on their loans. And once again, you act as if this is only a problem with gold, when in fact there is no currency that wouldn’t be affected in the same (or worse) ways.
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Your entire argument is, in short, based on a host of assumptions about how a gold-based economy with no Fed would operate, which are mostly groundless or outright false.
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As for getting the gold back, why not “nationalize” the Fed and get the gold back that way? Let’s face it, it’s only a private institution in some respects, because it’s entirely a government creation whose members are appointed by government. The only thing “private” about it is that its actions aren’t accountable to shareholders or the electorate via Congress/the President. If the federal government can create such a monstrosity, surely it can destroy it, at which point the assets revert to the government/the people from whom the gold was stolen in the first place. I’m not sure why you think this is such a hard thing to do. And by “worthless” I mean that it has no inherent value or even inherent stability. Paper money is worthless because in theory you can diminish its value indefinitely. You can’t do that with gold. Thus, it is at least stable. Do you actually think our current fiat system would be preferable to a gold standard?
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To sum up, most, if not all, of your complaints about the gold standard apply equally to a paper standard, but paper is worse because of the ease with which it can be manipulated.

Ryan, you said fractional reserve banking has existed for 400 years. While I have not verfied that assertion yet, I will assume here that it is accurate and respond accordingly.
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Fractional reserve banking was not allowed in the U.S. until the banking industry pressured the federal government into passing laws that allowed such. But that is not my main point.
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When we consider the nature of fractional reserve banking (which I will refer to as FRB herein) in principle and practice we see that the percentage that the bank holds is currently determined on the basis of what a bank needs to conduct its daily business. Currently, U.S. banks are at a 10% reserve. Do you know what the various percentages have been in different places and different times during the 400 years you speak of? The question is critical for the issue at hand.
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Next, FRB allows banks to make loans on money that does not exist. This is not fully accounted for in the manner in which banks keep their books.
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FRB allows banks to distort the money supply throughout the economy. I don’t know how anyone other than a Keynesian, would think this is a good idea.
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FRB in practice, actively promotes usury. Hence, a Distributist should be opposed to FRB on these grounds alone
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We can see the distortion in the money supply caused by FRB by reflecting that if a bank’s customers all demanded to withdraw their funds. The bank would crash unless it had outside intervention from the Fed. This is not good. If there were a widespread run on enough banks, even the Fed could not bail them out. That fact demontrates just what a fraudulent practice we have in FRB, and just how far the money supply has been artificially manipulated.

The solution should be to treat addicts instead of locking them up. In fact, what Portugal did seems to be the best way to handle the situation:

I don’t think we disagree here. Let’s look again. I said:The government could just as easily start prosecuting drug dealers instead of offering them plea deals…the fact that the war on drugs has been a colossal failure does not negate that the government can and should control their proliferation.

There are too many people who have used drugs, maybe even once, who are in prison where they only get worse. Mandatory rehabilitation for users with jail for the one proliferating the drugs is the solution. From what I remember reading when I worked in a different industry, most dealers of drugs do not use their own product, whether we’re talking about narcotics or prescription drug diversion, which is the hidden, even larger problem than illegal narcotics in many areas.

Right now we have a very unstable monetary system. It allows for the government and Fed to inflate, monetize the debt, generate fiat money out of thin air, and the banks on the fractional reserve system to distort the money supply. None of things would even be possible on a sound commodity money system.

See above. Fractional Reserve banking has been practiced for well over 400 years on a gold standard.

Second, as I’ve argued before, no one can arbitrarily take existing gold and hoard it against the will of the holder of the gold. If you’re worried about price stability, see my discussion above regarding supply and demand. There is simply no such thing as absolute stability in that regard, and it wouldn’t even be desirable.
Absolutely they can, and this has been done. If someone, say a Rockefeller, has billions of dollars in gold, and does not spend it into circulation (because he does not need it), then the value of gold goes up because there is less of it in circulation. Let’s now say, which is far more likely, rather than treasure chests full of gold under his bed he has them in a bank, or several banks. What do the banks do with it? They increase their deposit at the central bank so they can loan more out at a fractional reserve. They will take the actual gold and acquire assets and government bonds, or stocks, they will loan their phony credit to us plebs and charge us interest, which requires us to pay our gold to them on money they did not have, just as they do now with the fiat currency. This creates mass default merely by the arithmetic unless, they re-invest 100% of the interest back into the economy so it can be earned and paid back to them. Otherwise the system defaults. So the value of the gold goes up with respect to the paper to back it, because the paper currency is artificially inflated and deflated by bank credit priced in that currency. So yes there will be hoarding, and it will take effect unless the banks are by law required to lend at a 1:1 ratio.

Ben Yonan’s response pretty much sums it up. Gold was essentially stolen from people over the course of the 20th century and exchanged for worthless paper money. The government could just reverse the process. Simple.

I don’t think you understand how this process works. Granted yes, via the Gold Bullion Act of 1933 Americans’ gold was stolen from them by the FED, a private unregulated body, via the government which it controls. That is not possible to reverse without nationalizing the FED, because the FED owns the gold. When Reagan tried to restore the gold standard in the 80’s, he was told that the gold in Fort Knox belongs to the Federal Reserve Bank, not the US government, as collateral for America’s debts. When the Fed issues a dollar, whether backed by gold or not, that represents money lent by the FED to the government at interest. To take the gold back means the government must pay for it (impossible given the price of gold with respect to the dollar, or the fact that the money belongs to the FED anyway), or steal it back.

Furthermore is our fiat currency really worthless? That paper also pays for vital services you depend up, fire departments, police departments, education, healthcare subsidies, all which create a service you need paid by the government with those dollars. Are these all really worthless? If its really worthless you’re free to relieve yourself of your dollars and place them in my savings account. ; )

Gold is a protector of property rights because under a sound gold standard the government or the banking cartel cannot cause inflation

I’m sorry, but with respect to monetary history since the 18th century this is bupkis, much like Greenspan’s flawed analysis, because of two factors: banks or governments issuing paper money nominally backed by gold for which no gold exists; and the fraud of fractional reserve lending. With fractional reserve lending in an economy where all dollars in existence must be backed by some determined amount of gold in the central bank, banks create credit for money they do not have, and this causes inflation bubbles. If the bank has a deposit of gold at the central bank, they can lend 9 times that money (depending on the reserve ratio, here we assume a 9:1 ratio), which does not exist and then collect interest on it. That is outright fraud. More importantly, the bank by that process is creating money for which there is no gold in existence. Hence when mortgages default, the money supply contracts because that money which did not exist except on the bank’s books, (which we call “bank credit”, which existed for much longer with a gold standard than with fiat currency) is gone, and the overall money supply contracts via credit.

Moreover with statements like this, you are proving me correct rather than incorrect: First, you make the same mistake Mr. Grant makes by assuming gold must continue to be found in order to support a growing economy. This is based on a misunderstanding of how money works. Money, as a medium of exchange, is subject to supply and demand curves like any good or service.

This proves me correct rather than incorrect. You cannot increase the supply of gold without finding it in the ground, and you cannot decrease it except by taking it out of circulation. So if the demand for goods and services in an economy exceeds the amount of gold to exchange for them, prices go down because the gold is worth more. This benefits those who have the gold rather than those who do not. It is a dividend on their money. This also has the effect that there is not enough money to be earned to pay debts, or to facilitate economic exchange (buying and selling) and it causes unemployment, poverty, and defaults on loans which are at fixed rates and do not adjust with the value of the currency. So if the government central bank, or as was in the case of England since 1694 and the US since 1913 a private bank with control of the money supply, they try to adjust the problem by making the paper backed by gold worth less quantity to put more money out (i.e. instead of one ounce of gold a pound/dollar is now with 1/2, 1/4th, 1/8th, 1/16th an ounce of gold, etc) you have not increased the amount of gold, only the quantity of paper representing it, so you cause inflation. There is more money to be earned but it is proportionally worth less than there was previously. There is only one way to increase the money supply in a way that does not cause inflation, to get more gold which comes out of the ground. QED.

Paul,
The fact that you can quote the AMI website, Lock, Aristotle, or anybody saying anything is no proof that their assertion is true. Your quotes don’t even back up their points with reasons. Yet I know of examples of currency in history that were not merely instances of “abstract legal power,” but natural outgrowths of economic exchange. Money usually does end up being controlled in some fashion by government, but that hardly means money is not natural. It merely serves as further evidence that government inevitably puts its dirty hands on everything.

Your other arguments have largely been addressed by Ben Yonan, but a few haven’t and some deserve further attention.

First, you make the same mistake Mr. Grant makes by assuming gold must continue to be found in order to support a growing economy. This is based on a misunderstanding of how money works. Money, as a medium of exchange, is subject to supply and demand curves like any good or service. Consider, first of all, that all monetary “values,” such as “dollar” or “franc” or “denari,” are purely arbitrary denominations. They mean nothing in absolute terms. With this in mind, consider what happens when the supply of money increases–prices rise. Note that prices are very different from actual value. A “price” is a given amount of the arbitrary denomination of money, while value is more absolute, though also less concrete. The value to me of a roof over my head is pretty constant over time, but if inflation continues to occur the price will go up. Likewise, if the supply of money decreases, prices also decrease. Both examples have happened in the past. That’s taking into account only the supply curve of money. Now let’s instead look at what happens if the money supply remains constant but the economy grows or shrinks. If the same amount of money is available over the course of a huge growth in the economy, will everyone suddenly starve? Not unless a government is artificially keeping the “price” of money low. In the absence of artificial controls, a growth in the supply of goods and services during a period of monetary stability will simply lead to a decrease in the price of goods. You can think of it as a decrease in the money supply next to a constant level of goods and services. Both have the same effect. So to say that gold can’t keep up with the growth of an economy is simply fallacious when analyzed to the bottom. Usually the source of this notion comes from looking at certain periods of history when crummy things did happen to the economy, but those were always due to government interference, such as issuing more paper notes than could be backed with gold or simply artificially holding down the “price” of gold.

You also argue that gold fluctuating in price is a problem, but this is largely answered by what I just said. As a secondary consideration, though, I should point out that gold fluctuates in price now precisely because it’s not used as currency and because the currency we do have has been inflated almost non-stop since 1913. As I pointed out, inflation of the money supply leads to rising prices, so we would expect fluctuations in the price of gold. Beyond that, we have the fact that it is treated as an investment since it can’t be used as currency, and that explains the rest. So fluctuations in the gold market have no bearing on whether gold would make a good currency. Besides, can you think of a more stable form of money? All the criticisms you make would be just as true of anything else. But frankly, the stability of gold and silver are fairly easily demonstrable. First, alchemy still hasn’t found a way to turn other elements into precious metals. So there would be no arbitrary changes to the supply. Second, as I’ve argued before, no one can arbitrarily take existing gold and hoard it against the will of the holder of the gold. If you’re worried about price stability, see my discussion above regarding supply and demand. There is simply no such thing as absolute stability in that regard, and it wouldn’t even be desirable.

As to how you get gold, Ben Yonan’s response pretty much sums it up. Gold was essentially stolen from people over the course of the 20th century and exchanged for worthless paper money. The government could just reverse the process. Simple.

Paul, I have never seen anyone misinterpret this essay to the degree that you have. You talk about the fluctuation of gold prices. However, if you look at the long history of gold as money, you will see that the fluctuations are not large. Excessive fluctuations will occur when the price of gold is wrongly tied to the price of silver. Also, the price of gold abnormally fluctuates when the economy is artifically manipulated, as when FDR, who was economically a moron, would daily flip a coin to determine the price of gold.
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Gold is a protector of property rights because under a sound gold standard the government or the banking cartel cannot cause inflation, so as to diminish the value of gold, thereby wiping out one’s personal property. And this has nothing whatsoever to do with “gold profitability in investing.”
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The fact that Greenspan was chairman of the Federal Reserve is irrelevant to the content of the essay. It just means that as Fed Chairman, Greenspan acted against what he knew to be true about the gold standard. Of course, I don’t accept Greenspan’s endorsement of laissez faire capitalism from his days in the Ayn Rand circle. But much of his assessment of the gold standard can be taken in itself and apart from the kind of capitalism he endorsed at the time.
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Right now we have a very unstable monetary system. It allows for the government and Fed to inflate, monetize the debt, generate fiat money out of thin air, and the banks on the fractional reserve system to distort the money supply. None of things would even be possible on a sound commodity money system.
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How would people get gold who have none? The same way they get near worthless Federal Reserve Notes, only the gold or silver would be worth something in itself.

What a shabby defense of the gold standard. The fluctuation of the value of gold is more than enough to shoot down Alan Greenspan. St. Thomas Aquinas and Aristotle are both definitely superior to a mere chairman of the Federal Reserve, who helped further our country into worse debt.

Test. Ignore this post, it is only my test of available formatting.This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth.Gold stands in the way of this insidious process. It stands as a protector of property rights.

This essay by Alan Greenspan should answer any concerns about the gold standard. Greenspan has penned an impeccable defense of the gold standard.

GOLD AND ECONOMIC FREEDOM by Alan Greenspan
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An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense – perhaps more clearly and subtly than many consistent defenders of laissez-faire – that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other.
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In order to understand the source of their antagonism, it is necessary first to understand the specific role of gold in a free society.
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Money is the common denominator of all economic transactions. It is that commodity which serves as a medium of exchange, is universally acceptable to all participants in an exchange economy as payment for their goods or services, and can, therefore, be used as a standard of market value and as a store of value, i.e., as a means of saving.
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The existence of such a commodity is a precondition of a division of labor economy. If men did not have some commodity of objective value which was generally acceptable as money, they would have to resort to primitive barter or be forced to live on self-sufficient farms and forgo the inestimable advantages of specialization. If men had no means to store value, i.e., to save, neither long-range planning nor exchange would be possible.
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What medium of exchange will be acceptable to all participants in an economy is not determined arbitrarily. First, the medium of exchange should be durable. In a primitive society of meager wealth, wheat might be sufficiently durable to serve as a medium, since all exchanges would occur only during and immediately after the harvest, leaving no value-surplus to store. But where store-of-value considerations are important, as they are in richer, more civilized societies, the medium of exchange must be a durable commodity, usually a metal. A metal is generally chosen because it is homogeneous and divisible: every unit is the same as every other and it can be blended or formed in any quantity. Precious jewels, for example, are neither homogeneous nor divisible. More important, the commodity chosen as a medium must be a luxury. Human desires for luxuries are unlimited and, therefore, luxury goods are always in demand and will always be acceptable. Wheat is a luxury in underfed civilizations, but not in a prosperous society. Cigarettes ordinarily would not serve as money, but they did in post-World War II Europe where they were considered a luxury. The term “luxury good” implies scarcity and high unit value. Having a high unit value, such a good is easily portable; for instance, an ounce of gold is worth a half-ton of pig iron.
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In the early stages of a developing money economy, several media of exchange might be used, since a wide variety of commodities would fulfill the foregoing conditions. However, one of the commodities will gradually displace all others, by being more widely acceptable. Preferences on what to hold as a store of value, will shift to the most widely acceptable commodity, which, in turn, will make it still more acceptable. The shift is progressive until that commodity becomes the sole medium of exchange. The use of a single medium is highly advantageous for the same reasons that a money economy is superior to a barter economy: it makes exchanges possible on an incalculably wider scale.
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Whether the single medium is gold, silver, seashells, cattle, or tobacco is optional, depending on the context and development of a given economy. In fact, all have been employed, at various times, as media of exchange. Even in the present century, two major commodities, gold and silver, have been used as international media of exchange, with gold becoming the predominant one. Gold, having both artistic and functional uses and being relatively scarce, has significant advantages over all other media of exchange. Since the beginning of World War I, it has been virtually the sole international standard of exchange. If all goods and services were to be paid for in gold, large payments would be difficult to execute and this would tend to limit the extent of a society’s divisions of labor and specialization. Thus a logical extension of the creation of a medium of exchange is the development of a banking system and credit instruments (bank notes and deposits) which act as a substitute for, but are convertible into, gold.
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A free banking system based on gold is able to extend credit and thus to create bank notes (currency) and deposits, according to the production requirements of the economy. Individual owners of gold are induced, by payments of interest, to deposit their gold in a bank (against which they can draw checks). But since it is rarely the case that all depositors want to withdraw all their gold at the same time, the banker need keep only a fraction of his total deposits in gold as reserves. This enables the banker to loan out more than the amount of his gold deposits (which means that he holds claims to gold rather than gold as security of his deposits). But the amount of loans which he can afford to make is not arbitrary: he has to gauge it in relation to his reserves and to the status of his investments.
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When banks loan money to finance productive and profitable endeavors, the loans are paid off rapidly and bank credit continues to be generally available. But when the business ventures financed by bank credit are less profitable and slow to pay off, bankers soon find that their loans outstanding are excessive relative to their gold reserves, and they begin to curtail new lending, usually by charging higher interest rates. This tends to restrict the financing of new ventures and requires the existing borrowers to improve their profitability before they can obtain credit for further expansion. Thus, under the gold standard, a free banking system stands as the protector of an economy’s stability and balanced growth. When gold is accepted as the medium of exchange by most or all nations, an unhampered free international gold standard serves to foster a world-wide division of labor and the broadest international trade. Even though the units of exchange (the dollar, the pound, the franc, etc.) differ from country to country, when all are defined in terms of gold the economies of the different countries act as one-so long as there are no restraints on trade or on the movement of capital. Credit, interest rates, and prices tend to follow similar patterns in all countries. For example, if banks in one country extend credit too liberally, interest rates in that country will tend to fall, inducing depositors to shift their gold to higher-interest paying banks in other countries. This will immediately cause a shortage of bank reserves in the “easy money” country, inducing tighter credit standards and a return to competitively higher interest rates again.
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A fully free banking system and fully consistent gold standard have not as yet been achieved. But prior to World War I, the banking system in the United States (and in most of the world) was based on gold and even though governments intervened occasionally, banking was more free than controlled. Periodically, as a result of overly rapid credit expansion, banks became loaned up to the limit of their gold reserves, interest rates rose sharply, new credit was cut off, and the economy went into a sharp, but short-lived recession. (Compared with the depressions of 1920 and 1932, the pre-World War I business declines were mild indeed.) It was limited gold reserves that stopped the unbalanced expansions of business activity, before they could develop into the post-World War I type of disaster. The readjustment periods were short and the economies quickly reestablished a sound basis to resume expansion.
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But the process of cure was misdiagnosed as the disease: if shortage of bank reserves was causing business decline-argued economic interventionists-why not find a way of supplying increased reserves to the banks so they never need be short! If banks can continue to loan money indefinitely-it was claimed-there need never be any slumps in business. And so the Federal Reserve System was organized in 1913. It consisted of twelve regional Federal Reserve banks nominally owned by private bankers, but in fact government sponsored, controlled, and supported. Credit extended by these banks is in practice (though not legally) backed by the taxing power of the federal government. Technically, we remained on the gold standard; individuals were still free to own gold, and gold continued to be used as bank reserves. But now, in addition to gold, credit extended by the Federal Reserve banks (“paper reserves”) could serve as legal tender to pay depositors.
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When business in the United States underwent a mild contraction in 1927, the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. More disastrous, however, was the Federal Reserve’s attempt to assist Great Britain who had been losing gold to us because the Bank of England refused to allow interest rates to rise when market forces dictated (it was politically unpalatable). The reasoning of the authorities involved was as follows: if the Federal Reserve pumped excessive paper reserves into American banks, interest rates in the United States would fall to a level comparable with those in Great Britain; this would act to stop Britain’s gold loss and avoid the political embarrassment of having to raise interest rates. The “Fed” succeeded; it stopped the gold loss, but it nearly destroyed the economies of the world, in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market-triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result, the American economy collapsed. Great Britain fared even worse, and rather than absorb the full consequences of her previous folly, she abandoned the gold standard completely in 1931, tearing asunder what remained of the fabric of confidence and inducing a world-wide series of bank failures. The world economies plunged into the Great Depression of the 1930’s.
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With a logic reminiscent of a generation earlier, statists argued that the gold standard was largely to blame for the credit debacle which led to the Great Depression. If the gold standard had not existed, they argued, Britain’s abandonment of gold payments in 1931 would not have caused the failure of banks all over the world. (The irony was that since 1913, we had been, not on a gold standard, but on what may be termed “a mixed gold standard”; yet it is gold that took the blame.) But the opposition to the gold standard in any form-from a growing number of welfare-state advocates-was prompted by a much subtler insight: the realization that the gold standard is incompatible with chronic deficit spending (the hallmark of the welfare state). Stripped of its academic jargon, the welfare state is nothing more than a mechanism by which governments confiscate the wealth of the productive members of a society to support a wide variety of welfare schemes. A substantial part of the confiscation is effected by taxation. But the welfare statists were quick to recognize that if they wished to retain political power, the amount of taxation had to be limited and they had to resort to programs of massive deficit spending, i.e., they had to borrow money, by issuing government bonds, to finance welfare expenditures on a large scale.
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Under a gold standard, the amount of credit that an economy can support is determined by the economy’s tangible assets, since every credit instrument is ultimately a claim on some tangible asset. But government bonds are not backed by tangible wealth, only by the government’s promise to pay out of future tax revenues, and cannot easily be absorbed by the financial markets. A large volume of new government bonds can be sold to the public only at progressively higher interest rates. Thus, government deficit spending under a gold standard is severely limited. The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit. They have created paper reserves in the form of government bonds which-through a complex series of steps-the banks accept in place of tangible assets and treat as if they were an actual deposit, i.e., as the equivalent of what was formerly a deposit of gold. The holder of a government bond or of a bank deposit created by paper reserves believes that he has a valid claim on a real asset. But the fact is that there are now more claims outstanding than real assets. The law of supply and demand is not to be conned. As the supply of money (of claims) increases relative to the supply of tangible assets in the economy, prices must eventually rise. Thus the earnings saved by the productive members of the society lose value in terms of goods. When the economy’s books are finally balanced, one finds that this loss in value represents the goods purchased by the government for welfare or other purposes with the money proceeds of the government bonds financed by bank credit expansion.
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In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.
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This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.
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(Greenspan’s article originally appeared in a newsletter, “The Objectivist” published in 1966. It was reprinted in Ayn Rand’s “Capitalism: The Unknown Ideal.”)

The Aristotelian Concept of Money – a legal fiat
Both Locke and Franklin echoed Aristotle’s concept of money as an abstract legal power, a fiat of the law, summed up in Aristotle’s phrase “Money exists not by nature but by law.” (Ethics, 1133) To Aristotle money isn’t a commodity that comes out of a mine or a farm. It comes from “nomos” – the law or binding custom, and the Greek name for money was “nomisma.” Aristotle makes the supreme distinction between money which is abstract, and wealth which is tangible. He is the creator of the “science of money.” (Ch.1)
The history of ancient systems shows a pattern of Aristotle’s science of money being discovered; used to build the society; corrupted and then lost; and again rediscovered over the centuries.

I put an excerpt from the AMI website, showing the in the 19th century they were already using a fraudulent gold standard, which didn’t show yet since I put a URL link. Suffice it to say that they pretended all the paper money can be exchanged 1 on 1 with gold, and be all redeemed with gold, when such wasn’t the case. It was really paper money and gold money together, NOT an absolute gold standard.

Quoting again from AMI:

Was it ever Feasible to Use Gold for Money?
Aside from going counter to the true nature of money as an abstract legal power, there is a very practical matter that supporters of Gold money can’t address: There is never enough supply of gold sufficient for such a money system. The Gold supply has not kept pace with the growth of population and commerce. This periodically increased the real value of gold.

Money systems usually solved this problem by cheating – pretending to be operating a gold based system but really mixing private bank paper into the money supply, pretending it was convertible; leveraging the amount of gold in the system through fractional reserves of one type or another. Because this bestowed great power and unearned wealth onto bankers, there has never been a shortage of apologists for such mixed systems – we call them “economists!”

Mr. Mincher,
What exactly makes you think Ron Paul doesn’t have “strong moral and religious passion?” We’re talking about the only candidate who can legitimately claim to have been honest and keep his oath of office. And he has mentioned the fact that the President can use the bully pulpit to influence the country. Frankly, I don’t see how a candidate who has routinely violated his oath can be expected to “protect the soul of the country.” If you actually think the mere fact that Gingrich and Santorum believe the Presidency is super-important makes them a better candidate that would actually keep his oath of office, I’m not sure what your criteria for “good candidate” are. If anything, it seems to prove that the two of them are supremely arrogant.
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Paul,
The gold standard worked perfectly well for most of the 19th century, when politicians weren’t ruining the system (Lincoln with greenbacks, etc.). The very fact that in the 20th century it was largely fraudulent, as you mention, is no argument against the gold standard. Indeed, if anything it’s an argument for showing that it’s still worth a try. No system is perfect, because all systems are subject to the interference of fallible human beings, but that doesn’t mean the gold standard isn’t far superior to what we have now.

7) Doesn’t your AMA proposal merely continue with a fiat money system?
Shouldn’t we be using gold and silver instead? Wouldn’t that provide a more stable money?

Our system is absolutely a fiat money system. But that’s a good thing, not a bad one. In reaction to the many problems caused by our privatized fiat money system over the decades, many Americans have blamed fiat money for our troubles, and they support using valuable commodities for money.

But Folks! The problem is not fiat money, because all advanced money is a fiat of the Law! The problem is privately issued fiat money. Then that is like a private tax on all of us imposed by those with the privilege to privately issue fiat money. Private fiat money must now stop forever!

Aristotle gave us the science of money in the 4th century B.C. which he summarized as: “Money exists not by nature but by law!” So Aristotle accurately defines money as a legal fiat.

As for gold, most systems pretending to be gold systems have been frauds which never had the gold to back up their promises. And remember if you are still in a stage of trading things (such as gold) for other things, you are still operating in some form of barter system, not a real money system, and therefore not having the potential advantages as are available through the American Monetary Act!

And finally as regards gold and silver: Please do not confuse a good investment with a good money system. From time to time gold and silver are good investments. However you want very different results from an investment than you want from a money. Obviously you want an investment to go up and keep going up. But you want money to remain fairly stable. Rising money would mean that you’d end up paying your debts in much more valuable money. For example the mortgage on your house would keep rising if the value of money kept rising.

Also, contrary to prevailing prejudice, gold and silver have both been very volatile and not stable at all. Just check out the long term gold chart.

The United States had been on the gold standard (fraudulent) until the 70s when Nixon got us off it. When has there ever been a period when gold was stable, when it was used mainly as currency? No gold bug can show it.

I must respectfully disagree. Congressman Paul is correct that the president, constitutionally, should have little to do with banking, business regulation, and the matters that, through subsidiarity, are best and justly left to communities, families, and individuals.
However, that is precisely why it is important to elect a man with a strong moral and religious passion. The role of the president in the Republic is, as head, to discern and protect the soul of the country. A man who believes the president has nothing to do with the culture of his country is not the man we need to elect. I submit that, while Santorum or Gingrich’s big-government activities were mistakes, the fact that they understand the presidency to be the intellect, the head, of the Republic makes them better candidates than Congressman Paul. They do, granted, need to keep learning how to refrain from usurping the faculty of ‘the will’, so to speak.

Mr. Grant,
As I said, I assumed you weren’t including Ron Paul, but the context seemed to make your statement all-inclusive, which is why I asked.
As to the gold standard, the fact that the gold itself stays in a bank vault is not a problem; why would it be? It’s like saying checks are bad because the actual money is held in a bank. So long as no fraud is committed (by the drafter of the check/owner of the gold note or the bank itself), there’s really no issue. A bank can’t manipulate, let alone control, an economy just by being a storage place for currency. It would have to commit crimes, but there’s a reason such acts are criminal.
Secondly, no particular amount of gold is needed to match a GDP. The very nature of money is that it’s value, like the value of any good, adjusts based on how much is in supply. This is precisely why inflation drives down the value of the paper currency, as Ben Yonan pointed out. Besides, even under a gold standard silver would be an acceptable currency. Indeed, Ron Paul advocates freedom of the market place in terms of currency, so in theory we could use clam shells or salt (both ancient currencies).

As for tungsten, it really doesn’t matter much what your currency is–it can always be counterfeited. So that’s no argument against a gold standard.

As for who owns the gold now, whose fault do you suppose that is? Government; under FDR most privately held gold was confiscated. A lot of it went to Fort Knox, so really any of that could, even in a libertarian worldview, justly be recovered from whoever took it as restitution for theft. But aside from that, what makes you think banks could spend their gold and then tax it back as usury? You can’t tax something after you’ve spent it, so either “spend” is a typo for “send” or you’re using specialized terminology with which I’m not familiar. Either way, since the government set up the whole mess, it could simply require banks to exchange gold (or silver) for paper money with any customer who so desired, based on market rates. This wouldn’t be a seizure, either; it would be an exchange, as if the country decided to stop using clam shells and instead switch to salt.

Your final point is largely addressed by what I said above about money changing value based on supply, but I do want to specifically address your point about 1929. The problem there is that back then, paper money was still in theory backed by gold or silver. Find an old bill from back then and it will actually say “silver certificate” or the like. Of course, the Federal Reserve printed more of these than it could actually pay (setting an ominous trend for future years), which for all practical purposes changed the amount of gold and silver, because everyone thought that their certificate represented an actual amount of specie that existed at a bank, when in fact that was not the case. Of course, shrinking the supply of notes had the effect one would suspect, not from shrinking a money supply (such an event never creates the kinds of problems you mention), but from “cooking the books.” The Feds had essentially been running an Enron type scam. Then people learned they really didn’t have as much money as they thought. It would be like me handing you 8 good dollars and 2 counterfeit. You think you have $10, go into debt for that amount, then learn two of your bills are counterfeit and can’t pay. That’s not a problem of shrinking the money supply at all, but one of thinking the money supply is actually greater than it is, all made possible by the fact that the Federal Reserve was simultaneously inflating while still claiming each inflated note was worth the same amount of specie it had always been worth. That’s a long way of saying that your analogy doesn’t work, but of course the other problem is that no one can arbitrarily remove gold or silver from circulation, and in a sane legal system no bank could legally print more certificates than it could actually pay back in specie.

I’m not sure how helpful it is to throw around words like “paulbots”, etc. Does that really help in the discussion here? Not really.

None of the candidates, including Mr Paul, are terribly exciting and it would seem to me that the present swine in the White House is a shoe-in for a second term if this is all the Republicans can come up with. Although I enjoyed Ryan’s article very much I can’t help feeling terribly depressed.

There are more interesting races in Russia than in the USA and, no, I am not joking.

Ryan Grant, isn’t there still a fair amount of gold at Ft. Knox? Perhaps Ron Paul has the reserves there partially in mind.
I wonder too if the “greenbacks” issued under President Lincoln would have had to be stopped even had he lived to complete his second term. Those paper bills were used to pay the US Army. When the great majority of the soldier boys went home to their farms or businesses after the cessation of hostilities, the need for the greenbacks would likely have gone with them. Nineteenth century America was very chary of large numbers of national government employees except for temporary armies, as in the Civil War.
Btw, why didn’t you capitalize “Chinese” and “Indians”? Interesting info about tungsten being so close to gold in key respects, I didn’t know that.
Viking

Ryan, a primary issue involved with advocates of the gold standard is that we need to return to a real money system, i.e. “commodity money”, versus the current “fiat money” system of Federal Reserve/U.S. Treasury counterfeiting.
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Where is the gold, you ask. That is not a major problem. An economy grounded on the gold standard has always worked as the price of gold tends not to fluctuate much and it precludes the government and the banking cartels from manipulating the money supply.
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Almost anything precious can be used as money. It does not have to be gold. Silver has also been used throughout history. And a gold standard must avoid the errors of the past in which the price of gold was tied to the price of silver.
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Portability is not a problem under the gold standard. Gold (and Silver) Certificates can be issued. The certificates will be protected from going the way of the Continental when the corrupt banking laws are changed to prohibit fractional reserve banking. We must go to a 100% reserve banking so banks cannot inflate the money supply.
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Next, gold certificates would also be protected from inflation (which currently debases the U.S. dollar) by eliminating the Federal Reserve System with its banking cartel, and those fraudulent practices of the U.S. Treasury in which counterfeiting is the order of the day, i.e. generating fiat money.
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In the 1960’s Alan Greenspan wrote an essay which is an impeccable defense of the Gold Standard. Not too many years ago, Greenspan said he still stands by every word in that essay. At no time did Greenspan express any concern about the availability of gold or silver for converting our economy back to a sound money system.
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Furthermore, Ron Paul has not expressed gold availability as an insurmountable problem. Paul has been a member of the United States House Committee on Financial Services and has written a book on the Fed. You should read, “End the Fed” by Ron Paul. I do not know of any financial expert of any repute that thinks returning to the gold standard is a problem due to the limited quantity of gold. It is the very fact that gold is limited, which contributes to the value societies normally attach to it. Also, as I mentioned, there are other precious metals, such as silver, that can be thrown into the mix, as long as their values are not tied to each other.
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Since the creation of the Federal Reserve in 1913, the U.S. dollar has lost about 95% of its value. The dollar is now coming close to being rejected on the international market. This would have never happened if America retained a sound money system. The gold standard also makes it impossible for Congress to keep overspending and sinking America further into debt.
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If there is a real lack of gold it may be seen at Fort Knox. There has been vehement opposition in D.C. to an audit of the gold in Fort Knox. We have no idea whether or how much gold is left therein. In addition, a proper audit would not be a matter of bean counting bars of gold. It would require determining who now owns what gold.
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Every manner of economic evils has resulted from the introduction of paper money, which is not money. A silver dollar, on the other hand, was worth a dollar. Moreover, in the early 20th century a Silver Certificate was redeemable for a Silver Dollar, weighted to .77ozt Silver.

do you actually believe Ron Paul is a “Wall Street Puppet?” I tend to think you were only referring to the other candidates,

I was referring to the other candidates. I thought it was clear, I’ll have to read it again, that I consider Paul distinct from all the other candidates in integrity, honesty, and that he is not owned by the system. That’s why they’re jumping through hoops to avoid him.

As far as the gold standard, even some basic history on the populist movement will make this clear. Historically gold exists in too small a quantity to be sufficiently portable, so gold is generally exchanged by promises to repay. Historically every government even ours has used paper promises to pay in gold. Where is the gold? At the bank. Secondly, where is all this gold you are talking about? It would take several times the amount of gold estimated to be in existence to back the current GDP. Thirdly, gold can be faked very easily with Tungsten, which is the near to the same atomic weight as gold and this has happened several times to the chinese and the indians when they have demanded to take hold of their gold reserves.
Right now where is all the gold? Banks own it as assets, and a few wealthy individuals have smaller reserves. How is all of this gold going to get into the economy? The banks will spend it into the economy and tax it back via usury. They will completely control the supply, issuance and manner in which the currency is used, unless the government nationalized gold by seizing it from American institutions which had it, which is contrary to both Distributist and Libertarian principles. Fourthly gold is a single uniform commodity, limited in nature, and to get more you have to dig it out of the ground. That is not a currency which can successfully keep up with the demands for the exchange of goods and services in the market. The net result, which is the history of the 19th century after the suppression of Lincoln’s Green backs, is there is not enough money to be earned to pay debts. That causes mass default in the market. This is the same principle that we see at work when the Federal Reserve removed money from circulation in 1929. There was not enough money to pay back debt, and the mass default caused businesses to close down and people to be foreclosed on.

On a side note, Mr. Grant (Ryan seems inappropriate if only because there are two Ryan’s about), do you actually believe Ron Paul is a “Wall Street Puppet?” I tend to think you were only referring to the other candidates, excluding Ron Paul because he “has no chance,” but I’m curious to know for sure. Also, I would argue that electing the right President CAN make an enormous difference, precisely because most presidents won’t even allow state and local community’s to do their own thing in a variety of ways, whereas someone like Ron Paul (thanks to his understanding of federalism) would. E.g., by not enforcing the abomination that is Roe v. Wade (Ron Paul I believe actually mentioned the possibility of simply not enforcing it in an interview). You’re right that it’s not a magical cure-all, but I think you might be treating the idea too lightly.

Call me a Paulbot, but this article has some glaring problems in its analysis of his position. It also seems to assume some of his personal views actually matter when, in fact, they don’t, and it makes a few more general errors. I’ll hit each topic under separate headings.
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Misrepresentations
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1. This has already been said, but I want to add a few points–Ron Paul does not want to “legalize drugs.” He wants to end federal criminal laws on drugs, for several reasons. First, it’s a state issue, so the federal government doesn’t have a legal say in the first place; the current laws are all usurpations of state powers. Second, the drug war causes much more harm than it solves in many ways. Is it really so bad to smoke marijuana that you should be thrown in the federal clink for several years, only to come out a more hardened criminal? As Ron Paul has stated many times, addiction is a medical problem, not a legal one. The analogy to alcohol is one I’ve never seen an answer to, and it’s perfect. If you want to control drugs, why not alcohol? Now, under a Paul presidency, any state could still ban whatever drugs it chose, so this is in some ways moot. But lets say no states did. Instead, you would have AA groups for people hopelessly addicted. And that would probably be MUCH better than the current system. One final point: while it might be desirable to prevent people from using drugs in the first place, a very strong argument can be made under Catholic principles that this is the sort of thing that government simply shouldn’t try to micromanage. How are you going to catch all the people who grow weed in their back yard and smoke it in their own home? The costs (both to the public treasury and our privacy) would be far out of proportion to the benefit.
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2. On Natural Law, it is certainly not “anathema” to libertarianism, though really Mr. Grant has already admitted this. I will merely point out here that libertarianism is a philosophy that says people (including government) should not initiate force against those who have done no harm. An article I read recently made the point that, defined in this way, there really is no divergence from traditional Natural Law thinking (I think he specifically mentioned pro-life issues), because the details come down to what you think harm is. Not to blend in with my second topic, but this really doesn’t even matter because Ron Paul’s libertarian views simply won’t affect what states do.
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3. Possibly the single worst part of this article is the discussion on Ron Paul’s views of war. Mr. Grant says that Ron Paul doesn’t believe government should be in the business of war at all, and only opposes the wars in Afghanistan and Iraq on those grounds. I’m assuming Mr. Grant missed a few debates, because Ron Paul specifically and explicitly raised the issue of Just War theory at least twice in reference to this precise issue. Furthermore, he has never said that it isn’t government’s job to go to war; what he has said is that it should not be aggressive or preemptive. Indeed, he explicitly stated in at least one debate that if Congress declared war, he would fight it to win it. I can’t even imagine where Mr. Grant got his notion of Ron Paul’s view on this, because it’s so diametrically opposed to what the man has clearly said on multiple occasions.
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Views that Don’t Matter
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1. On Ron Paul’s “view of government” and how it relates to health care etc., it really doesn’t matter, because his policy will only affect the federal level of government. And guess what? The Constitution already leaves all the pertinent issues Mr. Grant mentions, such as health care, at the state level. So given that Ron Paul would have to swear to uphold the Constitution to take office, I really don’t see how this matters. The federal government simply has no authority on health care, or a host of other topics, but the states can do what they please. Of course, underlying Mr. Grant’s point is the assumption that a government funded solution to the health care crisis is a good idea, which I would dispute, but the point is that Ron Paul won’t (and Constitutionally, can’t) stop a state from implementing whatever solution Mr. Grant likes, and it would frankly be much easier to achieve something like that at a more local level anyway.
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2. I wasn’t sure where to handle letters of marque and reprisal, because I could take so many angles, but let’s just leave it at this: only Congress has the authority to issue these letters, so Paul, as president, couldn’t do it. I could argue that issuing them wouldn’t be as bad as Mr. Grant believes, but in the end it just doesn’t matter anyway.
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General Mistakes
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1. On the issue of gold, Mr. Grant states that Ron Paul’s policy of using the gold standard would bring us “full circle,” presumably by leaving control in the hands of a few by means of controlling gold rather than controlling paper money. There are two problems here. First, you can’t print gold, so “control” in this case means very different things when applied to the two different currencies. Secondly, even with a narrower definition of “control,” how is a bank going to control gold when it’s the currency? It’s not like people will all just voluntarily allow banks (or whoever Mr. Grant has in mind) to hoard all the gold. If gold is money, people will use it as money, spending it on what they want, which generally means it continues to circulate; the baker buys shoes, the shoemaker buys meat, and the butcher buys bread. Admittedly, I’m not familiar with what Mr. Grant is referring to when he says the late 19th century saw gold being used by the banking industry to control the economy, so I’d like someone to enlighten me on that, if they would.
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2. On the issue of Plan B, there are several problems. First, even Catholic teaching allows for the use of Plan B for uses other than contraception, so the mere fact that Dr. Paul prescribed them doesn’t mean he falls afoul of any meaningful standard. Second, again blending with my second topic, this is a purely state issue. The public welfare, morals, etc. were all left to the states to handle, and under a Paul presidency there would be nothing stopping a given state from banning contraceptive use. The issue of Ron Paul’s view on whether law should shape morality is really tied up in this as well. He might be wrong (I happen to think that more often than not the law changes in response to morality, not the other way around), but because morality is the state’s topic to deal with, it simply doesn’t matter.

Thanks for your interim response, Ryan. I will just say for now that I am not a libertarian, but what is important is to correctly understand the variety of libertarian views. There is merit to many views of certain kinds of libertarians. Note that the great Pope John Paul II co-authored a book with an Italian libertarian.

Give me a bit to get back to you. I need to mull over your thoughts for a few days.

As far as Natural Law, there are indeed some libertarians (generally catholic) who believe in natural law, contrary to the anarcho-libertarians. I even saw a piece recently by a libertarian which cited natural law in opposing intellectual property, which makes sense. Yet what use is there in appealing to natural law, when the only fundamental principle of government is that it protects against fraud or force?

I had addressed what to do, how to vote, what possible solutions might be, but with the overall length that I had it was little more than a rant, and the decision to cut it was sensible. So I’ve decided to launch a part III to deal with the overall philosophy of how to vote, what is really at the heart of the matter. In short, my advice is to look at your local elections, and look at who is best for subsidiarity, justice, etc. and make decisions based on that. I also say start breaking yourself of the left and right paradigm, which is phony.

I don’t understand how we’ve gotten to the point where bureaucrats can bury us all in rules pulled out their own who-knows-where and it is up to Congress to desperately try to stop them. How did this power inversion happen? Who ever voted for this?

@Ryan Grant – I don’t know if this was what you were trying to do, but your perspectives on the Repub candidates, to me, only shows the futility and danger in concentrating power in one person or small group. If you choose to vote, how do you choose which (and how many) of your values to abandon in order to advance others? How do you filter out the sociopaths, crooks and fools before they get their hands on the levers of power? The greater the power, the greater the injustice and destruction that results from its misuse? How do you justify unleashing this on a national (and global) scale?
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Asymmetry of power lies at the root of many (most?) of our social problems. I, personally, can’t see myself voting to give ANYONE a level of power that will inevitably perpetuate wide and deep misery and exploitation.

I have to raise disagreement with you on the drug issue, Ryan. The solution should be to treat addicts instead of locking them up. In fact, what Portugal did seems to be the best way to handle the situation:

“Many of these innovative treatment procedures would not have emerged if addicts had continued to be arrested and locked up rather than treated by medical experts and psychologists. Currently 40,000 people in Portugal are being treated for drug abuse. This is a far cheaper, far more humane way to tackle the problem. Rather than locking up 100,000 criminals, the Portuguese are working to cure 40,000 patients and fine-tuning a whole new canon of drug treatment knowledge at the same time.”

Of course, being Catholic, we know the real solution is to bring these people into the Church as that’s the only way they will ever truly walk upright on the straight and narrow path. Still, I believe the benefits of legalization of all drugs far outweigh the costs of the tyrannical “War on Drugs”. Here’s another great article from Forbes on all of this:

We need a serious discussion about a Distributist Party. Both parties have failed this nation. Both parties are taking us down the path of nation suicide. It’s time for folks to start thinking about how we can rebuild things afterwards.

Here’s something I would really like advice on, if anybody would care to put in their $0.02.

What about the Democratic Party? I understand that they are extremely pro-abortion. This is the most detestable part of their platform. But what about other parts of their platform? They seem to favor immigrant rights, as evidenced in the Dream Act; under President Obama, the emphasis of the “War on Terror” shifted to to Afghanistan instead of Iraq, and now we’re pulling troops out of Afghanistan; and they support healthcare reform, which the USCCB has called for multiple times. Many positions of the Democratic party are consistent with Catholic social teaching.

The insistence of President Obama and the Democratic Party on abortion is abhorrent, and we must do all we can to cultivate a culture of life. However, can’t part of that culture of life be encouraging healthy infrastructure envisioned in making sure all Americans have access to quality health care? The HHS mandate and other pro-abortion goals aside, I wonder if President Obama is really as bad as everyone says he is.

I really don’t know. I’m looking for a thoughtful critique of President Obama from somebody who understands more than I do. It seems that American Catholics are caught up in the anti-Obama fervor generated by the evangelical-fueled Tea Party who started calling him an anti-American socialist. Is this a cultural trend, or is the opposition to President Obama genuine?

I hope this isn’t too off topic. It’s just that I trust the Distributist Review and its contributors and readership.

Very good article. I confess, I was a little disappointed, but that might be my fault. I got the impression from Part I that you had outlined a cogent voting guide or plan of action for Catholics faithful to the Magisterium, but skeptical of our political system.

Most Catholic sources I find will say that we should vote for candidates who are 1.) pro-life and 2.) pro-traditional marriage. The Republican candidates meet these qualifications (to what extent they can and will shape a more Godly and life-oriented culture and legislature remains to be seen) but I find it difficult to vote for any of them because they tend to have extremely aggressive foreign policies and because their laissez-faire economics do little to promote the common good (cutting government funding to social welfare programs, slashing regulations put in place to ensure safe working environments, etc). We have a remarkably free market system and abortions have not gone down and there are still millions of Americans who don’t have health insurance. Neither Republicans or Democrats have it right… but, where do we turn?

From Part I, I got the impression that you had proactive voting suggestions for people, like me, who don’t understand politics and economics as well as others but truly want to make our vote count for true Catholic values. I was disappointed that your final conclusion was not to vote.

I’m very sorry if I sound negative. It’s just that I’m genuinely confused about the best thing we can do for public policy in our country and I’m having trouble finding good resources. I really do enjoy your work though, I’m glad to see an independent Catholic thinker out there. To echo a previous comment, I’d certainly buy you a beer.

My ideal candidate: Pro-life, pro-healthcare reform, pro-small business/agriculture. Maybe the best thing we can do is organize local initiatives?

Wonderful series, especially the commentary on Paul’s problematic appeal to people who take Catholic Social Teaching seriously. I like him better than the rest of the GOP guys still in the race and Obama, but there must be something better. I’m interested in your take on Buddy Roemer’s candidacy.

Mr. Grant, you stated, “We return to Natural law—anathema to the libertarian dialectic.” It appears to me that such a statement is too vague and general to be of any value. That is, there are many kinds of libertarians, from far left to far right. And many libertarians, if not most, do subscribe to some form of natural rights theory, which has as its source the doctrine of natural law.
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So, the issue is more correctly addressed by understanding whether a notable libertarian thinker accepts natural law, and, whether the version of natural law theory to which he subscribes is consistent with traditional natural law theory. There are many libertarian advocates of natural law, but the particular doctrine they adhere to may represent a deformed version of traditional doctrine.
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This is not to deny that there are notable libertarians who have, and unfortunately so, placed themselves completely outside of natural law theory. In sum, generalizations in this particular area tend to be misleading, and most likely wrong.

Ryan, I think your post, which refers to third parties, misses the point of the objections. Whether we talk about the two major parties, or third parties, we must still get our facts straight regarding the political and economic ideas of the candidates in question. So far, you have misrepesented Ron Paul is several areas. I do think this misrepresentation was NOT intentional on your part, but merely a misunderstanding.
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As President, Ron Paul would know he has no legal authorization from the Constitution, correctly understood, to mandate health care regulations of any type, drug use, or prostitution. These are strictly state and local matters (as made clear by the principle highlkighted in the 10th Amendment).
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If one were to advocate a federal prohibition on a certain drug, then he puts himself in the precarious position of saying I don’t think people should legally be able to buy, sell and use drug “x”, but I don’t mind advocating a means for this control that are illegal, i.e. unconstitutional means, as well as violate a universal principle of sound government, i.e. the principle of subsidiarity.
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The legally correct way to modify anything about the kind of government intended by the Framers is by constitutional amendment. Of course certain modern amendments violate the original intent of the Constitution, but as long as the Constitution remains the legitimate and highest law of the land, many or most federal laws and agencies exist illegally. So why contribute to the growing lawlessness and illegitimacy of the federal government (actually it is now a ‘national’ government) by playing the same game of circuventing original intent and subsidiarity by supporting laws that are enacted because someone merely thinks they are a good idea?
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Once one plays into the end-run game around the Constitution, literally anything can happen on a field that is very long and wide. On the other hand, when primary government is local, as was highlighted by the 10th Amendment, and politicians are held to account locally, the damage that can be done to the common good is minimal.
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G.K. Chesterton said “THE men whom the people ought to choose to represent them are too busy to take the jobs. But the politician is waiting for it. He’s the pestilence of modern times. What we should try to do is make politics as local as possible. Keep the politicians near enough to kick them. The villagers who met under the village tree could also hang their politicians to the tree. It’s terrible to contemplate how few politicians are hung today.” ~Interview with the Cleveland Press (March 1, 1921).

What concerns me here is that without the kind of political and economic liberty espoused by Ron Paul, I see very little opportunity for the development of a Distributist economy, which in essence, will provide the needed economic changes. I know this may sound vague to some, but What chance has Distributist cause against the forces of a Leviathan federal government and the Federal Reserve with its banking cartel and control of the money supply?

None, if we continue to think there’s a magic president we can get into office past the financial and lobbying interests who can suddenly make it happen. Now, if it had to be one of the four, I’d say Paul since he couldn’t possibly do worse than Obama. But nothing would fundamentally change, we’d just be staving off what the financial interests want for 4 years while Republicans and Democrats worked hard fighting him.
To really change the system, we need to change our society at a state and local level, involve our town councils, our state utility commissions, our sheriffs, our legislatures, etc, to enact policy to help us get production and living wages back to our economy. If we don’t do that we will never get anything done irrespective of which Wall Street puppet we get into office.

Hmm. I think you need to expand on your final sentence quite a bit, lest all the libertarians miss the point. Also, I take it there will be a Part III to include musings on third parties, none-of-the-above, etc., as was somewhat obliquely referred to in a comment to Part I?

We made an editorial decision this piece was too long, nearly 5,000 words, so I had to cut out that angle in favor of a future post on 3rd parties, alternatives, etc. I apologize for that. My thought on a third party is simply that while good is irrelevant in the ultimate scheme of things as it stands now. I may not vote nationally at all. As the system is currently a vote for a third party is essentially your way of saying I do not believe in the system. Its a good start, but until we get a grass roots movement all 50 states an alternative to the system can scarcely be realized.

This article, on a whole, is quite sloppy; something I would expect to be written by a high school senior or college freshman. Government policy is debated without a single reference to the framework of our government- the U.S. Constitution. There is no distinction between state and federal government, which is vital to any intelligent discussion about politics in the United States.

An example of the imprecision that plagues this article is the hackneyed statement “Ron Paul also wants to legalize drugs.” This is vaguely true; he wants to repeal FEDERAL drug laws. What about the states? Of course Ron Paul thinks states may pass laws criminalizing drugs. He sees that the U.S. Constitution allows the states to prohibit drugs, but that is not a power of the federal government. Likewise, Paul has no opposition to states outlawing contraception, but this is not the business of the federal government. Paul is questioning who has the legal authority under the Constitution to make and enforce these laws. I would think distributists would be more sympathetic to Paul because he favors subsidiarity, as he wants to bring more power to local governments.

One can argue what the government should and should not do, but this article seems to completely miss the fact that the federal government is limited in what it can do by the Constitution. The federal government does not have the authority under the Constitution to establish the laws that the author favors.

Thank you for the essay, Ryan Grant. The only Republican candidate I consider to have any merit at all is Ron Paul. This does not mean I agree with every one of Paul’s positions. But I will waste no time or votes on the other Republican jokers. That being said, I think there are several points in the essay, which need to be addressed. (I will bang them out quickly with no time for editing.) My intent is to arrive at a more accurate understanding and valuation of Ron Paul’s political and economic positions. Since there are many points that need to be discussed or argued, I will begin here with just a few.
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I once agreed with Paul’s economics, which are based on the works of Ludwig von Mises. I am fairly well read in Mises, but I must reject a number of economic principles of the Austrian School, while accepting from it whatever I think is true. The bottom line here is I consider Distributism to provide the needed solution to Austrian economic errors.
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What concerns me here is that without the kind of political and economic liberty espoused by Ron Paul, I see very little opportunity for the development of a Distributist economy, which in essence, will provide the needed economic changes. I know this may sound vague to some, but What chance has Distributist cause against the forces of a Leviathan federal government and the Federal Reserve with its banking cartel and control of the money supply? Distributism, unless it is run strictly on the barter system, and maybe not even then, will everywhere be hampered by government and Federal Reserve’s manipulation of the money supply. We must ask ourselves in economic matters, Where are we without sound money? Where are we if the U.S. dollar is rejected on the international market? The fiat dollar is coming dangerously close international rejection. The scenario will undoubtedly be that if the dollar is finally rejected, there will be martial law in this country.
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Obama’s recent and creepy Executive Order, entitled “National Defense Resources Preparedness” actually prepares for martial and putting the economy on a wartime basis even if there is no national emergency. First, Obama is a corporatist, and such measures will financially favor certain large corporations. Secondly, Obama is an economic illiterate. It is my belief that Obama personally believes the economy can be rescued by militarizing it. This is what FDR did. He did nothing constructive toward recovering from a depression. He merely changed the economy from a peacetime to a war economy, and this presented the illusion of economic stimulation. In short, only Ron Paul, amongst the Republican candidates, correctly understands how to fix these problems as they exist at the present time. Only with Paul’s proposed changes in the government, and restricting excessive government and Federal Reserve manipulation of the economy, can we ever get to a place in which Distributism is able to make a comeback. It is a matter of how to get from A to B in our particular political/economic condition.
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Next, I think there is a widespread misunderstanding of Ron Paul on many issues. On reason, and one only, is that Ron Paul expresses his ideas in the context of the understanding of the Constitution, while most American’s do not, because a true Constitutional government is not their experience, and government according to original intent of the Constitution is not within their educational experience. Then there is that other group of people, who even if they knew what the intent of Constitution is, could care less.
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But let’s look at a particular health care issue. We can see that the HHS Mandate violates natural law, the First Amendment, and Catholic moral teaching. It violates all three because there is that in common which all three possess. It is somewhat futile to argue for an American audience that the legal problem with the HHS Mandate is an abuse of authority by the federal government, an abuse which violates the Bill of Rights, while asserting that the problem is solved if the federal government retains its involvement in health care, but restrains itself in areas that would violate natural law and Catholic doctrine.
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The problem here is that the Constitution does not authorize the federal government to be involved with health care. The Constitution grants authority to via the individual States and the people, limited and specific powers. And the federal government was only authorized to exercise a handful of specifically defined powers.
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So, what is up with this more positive role of government that Catholics advocate, over the more negative idea that “government is a necessary evil.” Well, I don’t view the negative idea as correct. I take the Catholic position. But if one takes the Catholic position it is not correct to criticize Ron Paul about his position on health care as it relates to the federal government. There is another Catholic idea that comes into play. It is the principle of subsidiarity. This principle is consistent with the 10th Amendment. According to this principle, the federal government should have no involvement in health care. This matter, as it concerns the common good and the legal structure according the original intent of the Constitution, should be a matter for the individual States and other organizations legally below the state. So far, no one has shown, as far as I am aware, that the problems with health care cannot be dealt with sufficiently at the local level, i.e. local governments, the church, private organization, etc. Many of the significant problems in health care today involve a violation of the principle of subsidiarity. Unless some compelling cause can be demonstrated, the federal government has no right constitutionally, or by the universal or catholic principle of subsidiarity.
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This same problem can used to correctly analyze Paul’s stance against the criminalization of drugs. The Constitution does not prohibit the individual states from criminalizing use of certain drugs. This is a matter that should be left for local government. We all know what a bomb was “Prohibition”. And G.K. Chesterton was vehemently opposed to Prohibition. But what are federal drug laws but a prohibition on substances other than alcohol? And the so-called drug war is nothing but an abysmal failure. If something only makes a problem worse, but we want to keep doing those things, in the same failed manner, then we are neurotics. I think there are many legal drugs for the many kinds of neurosis, but they only alleviate the painful symptoms while doing nothing about the cause. Ron Paul has the advantage of not being a neurotic.

Hmm. I think you need to expand on your final sentence quite a bit, lest all the libertarians miss the point. Also, I take it there will be a Part III to include musings on third parties, none-of-the-above, etc., as was somewhat obliquely referred to in a comment to Part I? I think it should be noted that the focus on the presidential candidates, rather than the Congress or state and local offices, shows how completely off-the-rails our system has become. I should be able to be blissfully unconcerned about who is President (after all, he doesn’t spend any time thinking about me!). The fact that I can’t means things have gone dreadfully wrong.

Remember that the milieu is set by the RNC. Even though Roemer was polling ahead of Huntsman, and Santorum at times, the RNC would not let him debate. They even let Palin debate, and she wasn’t a candidate.
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Roemer is saying something that they don’t want said: that until big money is taken out of politics, nothing will change.
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He will only accept signed donations of $100 or less. He has support of many #rootstrikers.
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According to http://www.thepoliticalguide.com/Profiles/Governor/Louisiana/Buddy_Roemer/Views/Abortion/ “Governor Roemer is pro-life. However, he does allow for the exceptions of rape, incest, and the protection of the mother’s life.
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While in congress, Roemer co-sponsored two pieces of legislation that would have prohibited federal involvement in the performance of abortions, except that Federal funds may be used for medical procedures required to prevent the death of the mother or the preborn child.”

Right now, the two parties argue and posture and name-call and distract, but nothing changes, because their actual bosses like things just the way they are.

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